Mid-Sized Crypto Funds Hollow Out as VC Fundraising Plummets
Crypto VC fundraising has plummeted since the Terra (LUNA) and FTX crashes, sinking from $86 billion across 329 funds in 2022 to $11.2 billion in 2023, $7.95 billion in 2024 and just $3.7 billion so far in 2025. This sharp downturn highlights increased LP caution and intensifying competition for capital from ETFs and digital asset trusts. While small funds under $50 million and large institutions like Paradigm and a16z may endure, mid-sized crypto funds face a “hollowing out” risk as LPs impose stricter selection criteria. The shrinking crypto VC fundraising environment signals potential liquidity constraints and slower project financing, posing bearish implications for trading activity and overall market stability.
Bearish
The steep drop in crypto VC fundraising—from $86 billion in 2022 to under $4 billion in mid-2025—signals heightened LP caution following the Terra (LUNA) and FTX collapses. Mid-sized funds lack the flexibility of top-tier VCs and the close-knit backing of small, specialized shops, making them vulnerable to stricter capital screening. Historically, reduced venture inflows have led to fewer project launches and lower market liquidity (as seen post-2018 ICO bust), creating bearish pressure on prices and trading volumes. In the short term, traders may see reduced token offerings and muted volatility; long term, diminished funding could slow innovation, weigh on market sentiment and extend a bearish cycle.