Original Author: Joe Zhou, Foresight News
A significant number of Asian Crypto VCs have vanished.
Over the past week, I reached out to over twenty investor friends in my contact list, and more than half of them have already left. Some have transitioned to AI, some have started their own ventures, and some funds have completely ceased investing.
If we rewind to 2021 or the peak of 2024, the Web3 investment market was once so frenzied that there could be a dozen or even nearly twenty funding announcements in a single day. Multi-million dollar rounds were commonplace. Back then, many believed Crypto would experience explosive growth. VCs scrambled to raise funds, projects rushed to launch tokens, and entrepreneurs sprinted forward.
But by the second half of 2025, the entire industry rapidly cooled. Today's Web3 market often sees only one funding announcement per day. Fewer and fewer VCs remain active on the front lines and continue to place bets on Web3.
What exactly have Crypto VCs experienced during this cycle? In the course of my investigation, I found several investors who are still active in Web3. Jocy, founder of IOSG, revealed: "We still invest in about 15 Web3 projects annually, 30% of which are lead investments, even during bear markets. In the first half of this year alone, we completed 3 primary investments."
Nine years, three bull and bear cycles, they have witnessed the industry's most manic, bubble-filled times and have also waded through the deepest troughs multiple times. In this bear market, Jocy told me, his biggest feeling is that the logic for Crypto VCs has fundamentally changed.
What follows is a first-person account from Jocy, founder of IOSG.
I've Been a VC in Web3 for Nine Years, Surviving Three Bull and Bear Cycles
I've been a Crypto VC for nine years now.
Since founding IOSG in 2017, we have experienced three bull and bear cycles in this industry, investing in nearly a hundred projects in total. Back then, the whole industry was still tiny. Bitcoin had just broken $1,000, Ethereum was less than $10, and most people didn't even know what "blockchain" was.
At that time, roughly 80%-90% of our portfolio was allocated to early-stage primary projects.
But now, with changes in the crypto environment, over the last two years, we have gradually adjusted our investment strategy, increasing the proportion allocated to Post-TGE (post-token generation event) and OTC (over-the-counter) projects. Our current portfolio is roughly composed of 50% primary, 30% Post-TGE, and 20% OTC.
For us, the early-stage primary market is still the core source of Alpha. But increasingly, we find apparent misvaluations in some Post-TGE and OTC assets, and the secondary market is starting to offer opportunities with better cost-performance ratios than the primary market.
Simultaneously, this strategy also provides us with better liquidity management space, offering a clearer DPI (Distributed to Paid-In Capital) exit path for our LPs (Limited Partners). I believe the future landscape will be: the top 20% of VCs who can clearly articulate a DPI exit path to LPs will take 80% of the market's capital, leaving the remaining funds to fight over the meager 20%.
We currently have over a dozen people, with teams spread across Asia and the US. Our strategy has always been global, allowing us to keenly sense the temperature shifts of the entire industry worldwide. The current market is actually quite quiet, with good projects being very scarce. Look at the Web3 startup scene in Silicon Valley; there are fewer and fewer pure Crypto newcomers, with a large portion of talent being drawn to the AI track.
The entire market is still in a relatively pessimistic phase, and this pressure won't subside in the short term.
Every few years, the crypto industry undergoes an extremely intense reshuffle: institutions exit, projects go to zero, sentiment plummets from euphoria back to desolation, and then it starts all over again. For us, this is actually the best stage to re-establish industry order and redefine value.
The industry's lowest point in each cycle is often when the best projects are born.
Many people think VCs just provide money. But truly enduring institutions are those that can actually help entrepreneurs solve problems. One of our biggest accumulations over the past nine years is our post-investment capabilities. Additionally, we have consistently focused on one thing: building ecosystems. From Infra to DeFi, to Consumer, and now to the intersection of AI and Crypto, we have essentially been piecing together a complete ecosystem map.
We hope that different projects can achieve synergy. This is something we value highly in the long run.
Crypto VCs Are Entering "Hell Mode"
How crazy was the industry at the peak of the last bull run? A seed-round project could be finalized in 3 days, with 5 institutions frantically competing for allocation. The same project might even have three different valuations at the same time.
We never participate in that game. That's not investing.
Now that the market has cooled, it actually creates opportunities for genuinely research-driven institutions. We can finally sit down and conduct proper DD (Due Diligence). We can spend three weeks, not three days, to seriously examine a project.
Therefore, this cycle represents a structural opportunity for research-driven funds. Because there's less money in the market, good projects actively seek institutions that can provide non-financial value, not just those that blindly offer high valuations. Our Alpha comes from deep judgment, not the speed of securing allocations.
Looking around, capital across the entire industry is shrinking.
Not long ago, a16z raised a $2.6 billion fund. While still a behemoth, it's smaller in scale compared to their previous fund. Large institutions like Benchmark are also scaling down.
US funds operate differently; many have 10-year cycles. In the last cycle, their main profits likely didn't come from investing in great primary market applications, but from heavily betting on major cryptocurrencies like Bitcoin. They used substantial dollar capital to push market valuations to the ceiling, but they didn't point the industry toward a realistic path for implementation.
In the post-bubble stage, US funds have ample reserves and many paths to choose from. But after being pushed to the peak alongside them, Asian funds found themselves with no clear path forward after the fall.
Over the past year, the VC fundraising market across Asia has been dismal. The vast majority of VCs find it extremely difficult to raise money. Almost no LPs insist on allocating to Crypto VCs.
So this cycle is an excruciating "Hell Mode" for Asian funds.
But viewed from another angle, this also means Asian funds must be more precise. With limited bullets, every shot must hit its target. We internally emphasize: don't invest in middle-of-the-road projects. Either invest in the industry's Top 1, Top 2, or don't invest at all. Because in a bear market, the middle tier is the most likely to collapse.
The Biggest Problem in the Crypto Industry: Tokens Are Decoupled from Value
In this cycle, we firmly avoid several types of projects: pure-Narrative infrastructure lacking PMF (Product-Market Fit), projects with excessive redundant construction and no cash flow, and those that are purely conceptual. The market has become completely immune to those "high FDV (Fully Diluted Valuation), low float" infrastructure tokens. Nowadays, if you're building Infra, institutions might even prefer to invest in your Equity, not your token.
For a long time, the Crypto industry has suffered from a major chronic disease: Tokens are in a state of long-term decoupling from real value.
In the past, many projects played a game of "casting off the old shell"—the truly profitable business revenue and core equity were tightly locked within real-world corporate entities; while the issued tokens served merely as interest-free financing tools, liquidity exits, or even chips for manipulating market sentiment.
Simply put, protocols earned real money on-chain, but token holders couldn't even get a share. They had no substantial claim on the value created by the project. This extreme misalignment of interest structures has caused countless investors to lose their shirts over the past few cycles. Because what they paid for was never a real "asset," but just an empty symbol with no defined rights.
After several rounds of brutal reshuffles, the industry is finally waking up today: A good Token must be one that can capture real value.
Quality projects are actively seeking transparency, clearly and strongly binding tokens to protocol benefits. This will become a key differentiating competitive advantage in the next cycle. Projects like Uniswap, Hyperliquid, Polymarket, and our portfolio company Morpho are strongly pushing this trend.
Take Morpho, for example. They publicly promised the market: the value generated by the protocol will be directly accrued to the token through programmatic settings, and will absolutely not flow to a separate company or equity. Similarly, Uniswap, after seeing loosening regulatory sentiment in the US, is adjusting in this direction. Hyperliquid has demonstrated the immense power of "token buybacks" through its actions.
Frankly, buybacks themselves are not a perfect metric for measuring interest alignment. But from a structural perspective, they genuinely give tokens core support. By continuously reducing circulating supply, establishing long-term interest alignment with token holders, and supplementing it with a transparent, programmatic buyback schedule, projects can forge a solid price floor for their tokens. For long-term holders, the nature of such tokens is undergoing a qualitative change—they are becoming more like bonds or yield-bearing assets, with their scarcity and intrinsic value steadily increasing over time.
Only tokens that truly possess value-capture mechanisms, have the ability for buyback-fuelled regeneration, and possess underlying support are qualified to traverse bull and bear markets, becoming a long-term financial asset rather than pure gambling chips.
Perhaps it's precisely because the industry has fallen to its most painful trough that Crypto can truly begin this "separating the wheat from the chaff" and "hardcore evolution."
The Greatest Projects Are Born at the Most Pessimistic Times of Each Cycle
Over the past few years, Crypto has actually undergone a massive "falsification" process, falling towards the worst possible outcomes: Which products have no real demand? Which narratives simply cannot hold? Which directions are destined to lose to Web2?
This process of falsification has buried countless amounts of money and top talent, but it has also gradually clarified the answers. For VCs, the investment logic must change fundamentally—it's no longer about betting on industry Beta or cycles, but about returning to business fundamentals.
We no longer view Crypto as an isolated island, but rather as "the digitization of finance." The industry has finally realized that what truly matters has never been illusory "big numbers," but the real value behind them. Now, when evaluating projects, we must dissect them down to the finest granularity: scrutinizing Consumer project retention rates, customer acquisition costs (CAC), and lifetime value (LTV); peeling back the ARR (Annual Recurring Revenue) of token-launched projects layer by layer to isolate sustainable, real revenue.
As Crypto transitions from a storytelling alternative circle to a genuine financial industry, the opposite of frenzy has revealed a massive value gap.
In the current market, people are more willing to pay for ethereal "imagination" but are mistakenly undervaluing projects that actually have revenue, users, and cash flow. Projects like Morpho, Sky, and even Uniswap, which recently clearly abandoned its IPO path to stick with its token ecosystem. These veteran protocols that have weathered complete cycles have lost attention during the deepest pullbacks of the bear market, yet their fundamentals have not worsened. In fact, with improving industry conditions and revenue capabilities, they are becoming healthier.
This is why we now allocate about 50% of our portfolio to these token-launched projects with real revenue. We concentrate our firepower highly on two directions:
- Real Yield and Financial Infrastructure: Including stablecoin payments, clearing and settlement, Neo-banks, and on-chain credit. For example, our investments in Ether.fi, Morpho, Centrifuge, and RedotPay—they have extremely clear user demand and positive cash flow.
- The Intersection of AI and Crypto: We reserve 20% to 30% of our capital, not for general-purpose large models, but absolutely focusing on crypto-native AI infrastructure (such as data training and collection).
Facing this disorderly and violent reshuffle, VCs themselves must also evolve. Now, every colleague internally is equipped with a dedicated AI Bot, which handles tedious data backtesting and cross-timezone coordination. However, dealing with people and making judgments based on human nature remain our irreplaceable moats.
After nine years, my biggest takeaway is: Truly great companies are almost never born at the most frenzied times, but when many people think the industry is finished.
In this cycle filled with layoffs, disillusionment, and confusion, many are leaving, even beginning to doubt if Web3 has a future. But it's only during the low points that you are forced to think: What do users truly need? What can survive long-term?
I still believe that the truly important things in this industry are just beginning. After the bubble recedes, the people who remain are the ones who will truly determine what the next round of the world will look like.
