650 million dollars, 1.5 billion dollars, 2 billion dollars, the crypto VC landscape has changed!

Author: Zhou, ChainCatcher

Many people feel that crypto VC is heading towards twilight.

Over the past decade, crypto VC has been highly homogeneous—crowding into the same tracks, telling the same stories, and competing for the same projects. It seems lively, but in reality, the industry is fragile.

However, what is happening now may be one of the most anticipated moments since the birth of this industry, as the market is experiencing real differentiation for the first time.

At the end of February 2026, two fundraising announcements appeared one after the other.

On one side, Dragonfly Capital completed its fourth fundraise, totaling $650 million, focusing on areas such as stablecoins, on-chain financial infrastructure, and the tokenization of real assets.

On the other side, Paradigm is seeking up to $1.5 billion for a new fund, expanding its investment scope from crypto to cutting-edge technology fields like AI and robotics.

Both are top-tier VCs in the crypto industry, and both are in a downturn cycle, yet they have taken such different paths.

If we also consider a16z Crypto, the question becomes even more interesting, as the firm is currently raising $2 billion for its fifth fund.

These three funds represent three distinctly different answers to the challenges faced by crypto VCs today.

Conserve: a16z Crypto's Long-Cycle Logic

In the fundraising landscape of crypto VC, a16z Crypto has long occupied a top-tier position. This is the fund line under Andreessen Horowitz (a16z) that focuses on crypto investments. Since 2013, it has completed four rounds of fundraising, totaling over $7.6 billion, making it one of the largest crypto funds in the world.

At the beginning of this year, a16z completed a new round of fundraising of $15 billion, spanning multiple directions including infrastructure, application layers, and growth funds, and has listed the intersection of AI and crypto as one of its key investment directions.

According to Fortune magazine, a16z Crypto is raising its fifth fund with a target of about $2 billion, planning to complete the fundraising before the first half of 2026 ends.

a16z Crypto partner Chris Dixon views blockchain as the next infrastructure of the internet, believing that the crypto industry is in a long "foundational period," similar to the neural network paper published in 1943 for today's AI, where true mainstream adoption requires decades of groundwork.

Dixon has publicly stated that 95% of the assets held by a16z Crypto today are from historical investments, as selling quality assets too early in venture capital is the worst decision.

The annual report released by the team each year continuously sends a signal to investors: even in a sluggish market, we are still seriously understanding what is happening in this industry.

The investors a16z Crypto targets are those long-term institutional capital in the crypto fundraising landscape, who have deep faith in the entire industry.

For them, as long as they still believe in the future of crypto, a16z Crypto is the natural choice.

Transform: Dragonfly's Financial Evolution

Founded in 2018, Dragonfly started as an early crypto VC connecting the Asian and American markets. The first fund was only $100 million, and at that time, its core competitive advantage was the geographic arbitrage capability of its co-founders across both markets.

Since 2019, Dragonfly has gradually extended into the secondary market, began managing liquidity funds, and formed its own trading team. This not only serves as a risk hedging tool but also provides real-time market data for primary market investments, becoming an auxiliary perspective for project evaluation.

In 2022, Dragonfly acquired the crypto hedge fund Metastable, co-founded by Naval Ravikant in 2014, bringing it under its umbrella, thus forming three parallel business lines: Dragonfly Ventures (primary investments), Dragonfly Liquid (liquidity strategies), and Metastable (hedge fund).

The judgment of primary VCs, combined with the trading capabilities of the secondary market, is the core difference between Dragonfly and pure primary crypto funds.

However, establishing this system did not happen overnight. Building an investment system that spans both primary and secondary markets means constructing two completely different decision-making frameworks, risk control systems, and talent structures—primary requires deep technical judgment of early projects, while secondary needs precise quantitative capabilities regarding market microstructure.

In previous job postings, Dragonfly has explicitly required candidates to possess professional skills in delta-neutral hedging and derivatives inventory risk management, which are already scarce in the crypto industry and require a long adaptation period when recruited from traditional financial institutions.

This trading system is a barrier accumulated by Dragonfly over many years and is also the most difficult aspect for other funds to replicate directly.

Today, Dragonfly has become a trading-driven institution spanning both primary and secondary markets, with approximately $4 billion in assets under management, and its investment portfolio includes unicorns like Ethena, Polymarket, and Monad Labs.

However, behind this is an industry trend that is not optimistic.

According to RootData statistics, the crypto primary market completed a total of $22.73 billion in financing in 2025 (excluding post-IPO and debt financing), a 120.6% increase from 2024; but in terms of the number of financing events, there were a total of 933 financing events throughout the year, a decrease of 40.3% from the previous year, marking a five-year low, with the monthly number of financing events showing a nearly one-sided downward trend.

While the total financing amount is increasing, the number of projects receiving financing is decreasing, indicating that money is becoming increasingly concentrated, leaving less space for small and early-stage projects.

Dragonfly managing partner Haseeb Qureshi believes that the previous broad crypto and non-financial application experiments have been disproven by the market. The new fund will focus on stablecoins, DeFi, and on-chain financial services.

He stated that the growth of recent investments like Ethena, Polymarket, Rain, and Mesh already illustrates the point: "The coverage of crypto is about to expand explosively, and we hope to support the founders at the center."

The investors Dragonfly targets are those financial institutions and trading-driven allocators that believe in the financialization logic of blockchain, as well as investors who hold a pragmatic attitude towards crypto.

They may not need the grand narrative of crypto changing the world; real liquidity and sustainable trading returns are the answers they seek.

The key to Dragonfly's path is to go with the flow; as the crypto industry becomes increasingly financialized, it has simply turned this trend into its core competitive advantage earlier than others.

Disrupt: Paradigm's Boundary Narrative

The story of Paradigm begins with a change in a set of numbers.

In 2021, Paradigm raised $2.5 billion, setting the record for the largest single fundraising in the history of crypto funds at that time.

By 2024, the third fund shrank to $850 million.

This time, the target is $1.5 billion, with the investment scope expanding from crypto to AI, robotics, and other cutting-edge technologies.

Paradigm's foundation is VC plus incubation, with co-founder Matt Huang coming from Sequoia Capital, having founded a machine learning startup at 19 that was acquired by Twitter; another co-founder, Fred Ehrsam, was a co-founder of Coinbase.

The team's advantage lies in early trend judgment and technical risk control. Patrick Collison, founder of Stripe and collaborator of Matt Huang, once commented on him: "He is calm, rigorous, and patient—these traits are particularly suitable for complex technologies with delayed influence."

Paradigm's investment portfolio includes early protocols like Uniswap and Coinbase, and these early bets have established its industry position.

As a result, Paradigm has been described as "more like a combination of a research lab and an engineering organization rather than a traditional VC."

After the collapse of FTX, Paradigm took three years to rebuild. However, the fundamental issue of a lack of quality early-stage targets in the crypto industry has not improved, which poses a more fundamental dilemma for a fund that emphasizes judgment and incubation capabilities—having no good projects to invest in is a more critical issue than a decline in market value.

Thus, Paradigm's shift towards AI is not a spur-of-the-moment decision.

In fact, as early as 2023, Paradigm quietly removed references to Web3 from its website. Matt Huang later explained that "the progress in AI is too interesting to ignore," and stated that crypto and AI are not zero-sum competitors, as there will be significant overlap between the two. Earlier this year, Paradigm and OpenAI jointly released EVMbench, a benchmark tool to test whether AI models can identify and fix vulnerabilities in smart contracts.

According to OECD data, global VC investment in the AI field is expected to reach $258.7 billion by 2025, accounting for 61% of total global VC investment, compared to just 30% in 2022.

However, looking at it from a more realistic perspective, Paradigm's shift towards AI has its more structural reasons.

In the entire crypto VC fundraising landscape, a16z Crypto firmly occupies the top tier of long-term capital, while Dragonfly is the most capable trader in the financialization track.

Paradigm's team gene cannot replicate a16z Crypto's long-term faith narrative, nor is it suitable to follow Dragonfly's trading-driven path.

Its team gene determines that it can only tell a narrative of integrated innovation, aiming to attract new funds that have already lost interest in pure crypto but are still willing to bet on cross-industry technology integration.

This is the underlying motivation for Paradigm's shift, and it is its only misalignment space.

Hack VC managing partner Alexander Pack (former managing partner at Dragonfly) stated that KKR and Bain Capital have shifted from pure private equity investments to credit and public stocks, and a16z has also established funds targeting various segments of the tech field. Paradigm's move, like the overall industry trend, signifies that the company is maturing and reintegrating into the broader tech landscape.

Three Paradigms, Three Bets

When we put these three funds together, a clear logical fork emerges.

They each answer the same question: during the downturn of the crypto industry, what justifies your continued existence as a fund?

a16z Crypto's answer is scale and faith. Large enough to weather cycles, deep enough in research to represent the industry, continuously conveying confidence to the market.

Dragonfly's answer is capability and focus. Deeply engaged in crypto financialization, using trading capabilities to compensate for the limitations of the primary market, maintaining the activity of funds in a period of project scarcity.

Paradigm's answer is narrative and boundary-breaking. Using a new story of the integration of AI and crypto to attract investors that traditional crypto VCs cannot reach, expanding its boundaries from one industry into the larger wave of technological integration.

Three funds, three responses. No paradigm is the ultimate solution, and no paradigm can be easily replicated—what story can be told ultimately depends on the team's gene.

This may be a sign of the maturation of crypto VC, no longer a stampede down the same path, but each finding the path they can walk. A homogeneous industry is fragile; only when different species can grow can the market be considered truly alive.