Why are six VCs aggressively raising over $6 billion in the "arms race" during a bear market?

Original | Odaily Planet Daily (@OdailyChina)

Author | Azuma (@azuma_eth)

The crypto bear market is still ongoing, but some highly signal-worthy actions have already appeared in the primary market.

On May 4th, Haun Ventures, a venture capital firm founded by former U.S. federal prosecutor Katie Haun, announced the completion of a fundraising round with a total size of $1 billion. The early and late-stage funds will each allocate $500 million. Over the next 2 to 3 years, it will primarily invest in startups in the crypto and blockchain sectors, while further expanding into intersecting tracks such as AI agents (AI Agents), fintech, and alternative assets.

Just one day later, a16z immediately announced that its fifth crypto fund, Crypto Fund 5, has completed fundraising and secured $2.2 billion in committed capital. The fund will continue to focus deeply on the crypto market, targeting segments that are most easily overlooked during cycle rotations but can create the greatest long-term value—turning the next generation of infrastructure into products people use every day.

If you pull the timeline back further, you’ll find this is not a coincidence, but more like a “collective consensus” among top-tier VCs.

This year in February, Dragonfly’s Fund IV completed a $650 million fundraising round; at the end of February, multiple media outlets reported that Paradigm is seeking to raise up to $1.5 billion for its next fund; in March, ParaFi announced that it had completed raising $125 million; in late April, sources revealed that Blockchain Capital is raising $700 million for two funds under its umbrella… In less than three months, only these six VC firms alone have quietly accumulated more than $6 billion in “dry powder.”

More importantly, this fundraising wave has not happened during the market’s hottest period, but during the bear market phase characterized by altcoin liquidity drying up, primary-market valuations falling, and lingering industry sentiment gloom. As a16z partner Chris Dixon put it, “We are in a relatively quiet phase,” and this is not chasing victory in a bull-market mood, but a typical counter-cyclical deployment.

Divergence in the primary market

If you focus only on the $6 billion fundraising amount, it’s easy to get the misconception that “the primary market is warming up,” but the reality is far more complicated. Across the survival situations of leading VCs and mid-sized and small VCs, the primary market has clearly shown a trend toward divergence.

For most mid-sized and small VCs, this cycle is proving much harder than they expected. Due to the continued poor performance of altcoins (almost missing the entire bull run), together with tighter liquidity in secondary markets, fund exit channels are severely blocked. As a result, positive returns on paper often shrink gradually with long unlock periods, and may even turn negative. Underperformance versus expectations in investment returns directly leads to a decline in LP confidence, making fundraising for new funds even more difficult.

So what we see is that most mid-sized and small VCs in the bear market have to move toward passive contraction: some choose to cut fund sizes and reduce the frequency of deals; some switch to pure secondary funds; and some simply completely exit the market. Many mid-sized and small VCs that had extremely high visibility in the last bull market have now disappeared from the scene.

In sharp contrast, it is the group of top-tier VCs that are still raising funds aggressively. Although these VCs’ pace of investing has also slowed as the market turns bearish, thanks to structural advantages, their dominance in the primary market is actually being strengthened continuously.

As for what “structural advantages” means, first, top-tier VCs often have stronger capability to monopolize resources, enabling them to capture the rare high-quality projects more effectively (typical examples include Kalshi’s backers being a16z and Paradigm; Polymarket’s backers being Dragonfly and ParaFi; Blockchain Capital having invested in Coinbase and Circle); second, top-tier VCs can cover a more complete investment lifecycle, from early pre-seed and seed through later Series A and Series B—giving them more opportunities either to buy in with follow-on allocations or to amplify returns; third, top-tier VCs have more room for trial and error, and their larger assets under management allow them to withstand a relatively higher failure rate and place bets on longer-term narratives; fourth, the brand effect of top-tier VCs translates into stronger bargaining power, meaning even in the same fundraising round, top-tier VCs often secure more favorable terms than mid-sized and small VCs.

This kind of structural advantage and disadvantage gap ultimately leads to divergence in the market, and the Matthew effect becomes increasingly prominent. In a bull-market backdrop, mid-sized and small VCs can still potentially stage a comeback through a handful of lottery-like bets, but within a bear-market cycle, this trend will only become more and more obvious.

What are all those $6 billion looking at?

According to disclosures from these six VC firms, the newly raised $6 billion will be deployed across the following sectors and directions:

• Dragonfly: bullish on the trend of crypto financialization, with particular emphasis on stablecoins, prediction markets, Agent payments, on-chain privacy, and real-world asset tokenization, among others;
• Paradigm: in addition to crypto, it also expands into AI, robotics, and other frontier technology areas;
• ParaFi: stablecoins, asset tokenization, and institutional-grade on-chain financial products;
• Blockchain Capital: focused on early-stage and growth-stage crypto startups;
• Haun Ventures: bullish on next-generation financial infrastructure, including stablecoins, asset tokenization, and prediction markets, while also seeing potential in Agent economics;
• a16z: mentions stablecoins, DeFi, prediction markets, and asset tokenization as financial infrastructure, and also believes that in the era of a big AI boom, the crypto network’s original characteristics can still be used to solve software transparency and verifiability issues.

Putting the public statements of the six VC firms side by side, you can see that although there are still some differences in emphasis among different VCs, overall their focus has clearly begun to converge.

The most core consensus, without doubt, is the new-generation on-chain financial infrastructure represented by stablecoins, asset tokenization (RWA), prediction markets, and on-chain payments. Whether it’s Haun Ventures, a16z, Dragonfly, or ParaFi, these keywords are repeatedly mentioned in the directions of their new funds. To a certain extent, this also means that the investment logic in the crypto industry is changing. Compared with the prior cycle—where bets were more driven by sentiment—top-tier VCs in this cycle care more about infrastructure-type projects that have already been preliminarily validated by real demand and have the opportunity to sustainably capture traditional financial flows for the long term.

In addition, top-tier VCs are also clearly stepping up their allocations to AI-related plans. Paradigm has explicitly stated it will put some funds into AI and robotics; Haun Ventures and Dragonfly have both also mentioned Agent-related directions. The reasons behind this trend are not complicated. On the one hand, AI has become the most certain mainline in the global technology industry right now, so top VCs cannot afford to miss it. On the other hand, the crypto industry is also trying to prove that it is not just an old narrative pushed to the margins in the AI hype, but can become part of the underlying infrastructure of the AI era—especially after the Agent economy gradually emerges, the crypto network’s original openness, composability, and permissionless characteristics begin to reassert their value.

Bear-market fundraising, at its core, is a bet on the next cycle

For VCs, the bear market is often the phase that truly determines future industry patterns.

Although bull markets make fundraising easier, project valuations—i.e., entry thresholds—tend to be higher. Only when market sentiment is low, liquidity is scarce, and industry narratives fail, do opportunities for VCs to capture excess returns through their judgment truly expand.

Looking back at previous cycles, bear markets do not kill off genuinely high-quality projects; instead, they accelerate market reshuffling and make “gold shine faster.” That’s also why, even though market sentiment remains weak today, top-tier VCs are still raising funds aggressively in a counter-cyclical manner.

Because what they are truly betting on is never “the present,” but rather, after the next cycle begins, who will become the new Circle, the new Hyperliquid, or the new Polymarket.