$650 million, $1.5 billion, $2 billion — crypto venture capital has already undergone a transformation!

Author: Zhou, ChainCatcher

Many believe that crypto VC is heading into its twilight.

Over the past decade, crypto VC has been highly homogeneous—clustering in the same sectors, telling the same stories, competing for the same projects. It may seem lively, but internally, the industry is fragile.

But what is happening now might be one of the most promising moments since the industry’s inception, as the market is experiencing real differentiation for the first time.

By the end of February 2026, two fundraising announcements emerged in succession.

One is Dragonfly Capital completing its fourth fund, raising $650 million, focusing on stablecoins, on-chain financial infrastructure, and real asset tokenization.

The other is Paradigm seeking up to $1.5 billion for its new fund, expanding its investment scope from crypto to frontier technologies like AI and robotics.

Both are top-tier crypto VCs in a downturn cycle—why have they taken such different paths?

If we include a16z Crypto in the picture, the question becomes even more interesting. Recently, the firm is raising $2 billion for its fifth fund.

These three funds represent three very different responses to the current industry challenges faced by crypto VCs.

Conserve: a16z Crypto’s Long-Term Logic

In the landscape of crypto VC fundraising, a16z Crypto has long held a top position. It is a dedicated crypto investment fund line under Andreessen Horowitz (a16z). Since 2013, it has completed four fundraising rounds, totaling over $7.6 billion, making it one of the largest crypto funds globally.

Earlier this year, a16z closed a new round of $15 billion, spanning infrastructure, application layers, and growth funds, with a focus on the intersection of AI and crypto as a key investment area.

According to Forbes, a16z Crypto is raising its fifth fund, targeting about $2 billion, aiming to complete fundraising by the first half of 2026.

Chris Dixon, partner at a16z Crypto, views blockchain as the next infrastructure of the internet, believing the crypto industry is in a long “building phase,” similar to how neural network papers in 1943 laid the groundwork for today’s AI. Mainstream adoption requires decades of preparation.

Dixon has publicly stated that 95% of the assets held by a16z Crypto are from their initial investments, because in venture capital, selling high-quality assets too early is the worst decision.

Their annual crypto industry report signals to investors that even in downturns, they are still diligently understanding what’s happening in the industry.

The investors they target are long-term institutional capital, believers in the industry’s potential.

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

Transform: Dragonfly’s Financial Evolution

Founded in 2018, Dragonfly started as an early-stage crypto VC connecting Asian and US markets. Its first fund was just $100 million, with its core advantage being the co-founders’ geographic arbitrage across China and the US.

Since 2019, Dragonfly has gradually expanded into the secondary market, managing liquidity funds and building its own trading team. This allows it to hedge risks and provide real-time market data for primary investments, serving as an auxiliary perspective for project evaluation.

In 2022, Dragonfly acquired Metastable, a crypto hedge fund co-founded by Naval Ravikant in 2014, integrating it into its operations. This created three parallel business lines: Dragonfly Ventures (primary investments), Dragonfly Liquid (liquidity strategies), and Metastable (hedge fund).

The core difference between Dragonfly and pure primary crypto funds lies in their judgment and trading capabilities—its ability to operate across both primary and secondary markets.

Building this system was not quick. Establishing an investment framework spanning both markets required developing two completely different decision-making, risk management, and talent structures—primary investing demands deep technical judgment on early projects, secondary requires precise quantitative understanding of market microstructure.

Dragonfly’s external hiring has explicitly required candidates to have expertise in delta-neutral hedging, derivatives inventory risk management, and related skills—such talent is scarce in crypto, and traditional finance firms also face long adaptation periods.

This trading system is a barrier accumulated over years, and one of the hardest to replicate.

Today, Dragonfly is a trading-driven institution operating across primary and secondary markets, managing about $4 billion in assets, with a portfolio including unicorns like Ethena, Polymarket, and Monad Labs.

However, behind this success lies a less optimistic industry trend.

According to RootData, in 2025, the total crypto primary market raised $22.73 billion (excluding post-IPO and debt financing), up 120.6% from 2024; but the number of funding events was only 933, down 40.3% from last year, hitting a five-year low, with monthly funding events trending downward.

Total funding amount increased, but the number of projects receiving funding decreased, indicating that capital is becoming more concentrated, leaving less room for small and early-stage projects.

Haseeb Qureshi, managing partner at Dragonfly, 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 pointed out that recent investments in Ethena, Polymarket, Rain, and Mesh demonstrate this shift: “Crypto’s coverage is about to explode, and we want to support founders at the center.”

The investors Dragonfly targets are those who believe in the financialization of blockchain, are trading-driven allocators, and have a pragmatic attitude toward crypto.

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

Dragonfly’s path is about riding the trend—crypto is becoming increasingly financialized, and it is just ahead of others in turning this trend into its core competitive advantage.

Breakthrough: Paradigm’s Boundary Narrative

Paradigm’s story begins with a set of numbers.

In 2021, Paradigm raised $2.5 billion, setting a record for the largest single crypto fund at the time.

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

Now, it aims for $1.5 billion, expanding its scope from crypto to AI, robotics, and other frontier technologies.

Paradigm’s foundation is VC incubation. Co-founder Matt Huang comes from Sequoia Capital, having founded a machine learning startup at 19 that was acquired by Twitter; co-founder Fred Ehrsam was a Coinbase co-founder.

Their strength lies in early trend judgment and technical risk control. Matt Huang’s colleague, Stripe founder Patrick Collison, described him as “calm, rigorous, patient—traits well-suited for complex technologies with influence post-implementation.”

Paradigm’s portfolio includes early protocols like Uniswap and Coinbase, which established its industry position.

As a result, Paradigm is often described as “more like a research lab combined with an engineering organization than a traditional VC.”

After the FTX collapse, Paradigm took three years to rebuild. But the shortage of quality early-stage projects remains a fundamental problem—without good projects, even a firm emphasizing judgment and incubation faces a deeper crisis than market cap decline.

Therefore, Paradigm’s shift toward AI is not a sudden whim.

In fact, as early as 2023, Paradigm quietly removed references to Web3 from its website. Matt Huang explained that “AI’s progress is too interesting to ignore,” and that crypto and AI are not zero-sum but overlapping. Earlier this year, Paradigm partnered with OpenAI to release EVMbench, a benchmark tool to test AI models’ ability to identify and fix smart contract vulnerabilities.

According to OECD data, in 2025, global VC investment in AI will reach $258.7 billion, accounting for 61% of total global VC investments, up from only 30% in 2022.

On a more pragmatic level, Paradigm’s move into AI has structural reasons.

In the entire crypto VC landscape, a16z Crypto dominates with long-term capital, while Dragonfly is the most trading-capable player in the financialization track.

Paradigm’s team DNA neither replicates a16z Crypto’s long-term belief narrative nor fits Dragonfly’s trading-driven approach.

Its team is built for a narrative of integrated innovation, aiming to attract those who have lost interest in pure crypto but are willing to bet on cross-industry technological convergence.

This is the underlying reason for Paradigm’s pivot and its only space for misalignment.

Alexander Pack, managing partner at Hack VC (former Dragonfly partner), notes that KKR and Bain Capital have shifted from private equity to credit and public markets, and a16z has funds across various tech segments. Paradigm’s move signals the company’s maturing and re-integration into broader tech fields, aligning with industry trends.

Three Paradigms, Three Bets

Putting these three funds together reveals a clear ideological divergence.

Each answers the same question: in a crypto downturn, why does a fund still exist?

a16z Crypto’s answer is scale and faith—big enough to survive cycles, deep enough to represent the industry, continuously conveying confidence to the market.

Dragonfly’s answer is capability and focus—deeply engaged in crypto financialization, leveraging trading skills to compensate for primary market limitations, maintaining active capital during scarce project periods.

Paradigm’s answer is narrative and boundary-breaking—using AI and crypto’s fusion to attract investors beyond traditional crypto VCs, expanding its scope into larger waves of technological convergence.

Three responses, three paradigms. No single model is the endpoint, nor can any be easily copied—what stories they tell ultimately depends on team DNA.

This may be a sign of crypto VC’s maturing: no longer a herd rushing down the same path, but each finding its own way. Homogeneity makes the industry fragile; diversity allows different species to thrive, ensuring the market’s vitality.