Written by: Joe Zhou , Foresight News

A large number of Asian Crypto VCs have disappeared.

In the past week, I contacted more than 20 investor friends in my address book, and more than half of them have left. Some have switched to AI, some have started their own businesses, and some funds have completely stopped investing.

If we turn back the clock to 2021 or 2024, the Web3 investment market was so frenzied that there were dozens, even nearly twenty, funding announcements a day, and tens of millions of dollars in funding were commonplace. Back then, many believed that cryptocurrencies would experience explosive growth. VCs were desperately raising funds, projects were frantically issuing tokens, and entrepreneurs were running around like crazy.

However, by the second half of 2025, the entire industry had cooled down rapidly. In today's Web3 market, we often see only one funding announcement a day. The number of VCs truly active on the front lines and continuing to invest in Web3 is dwindling.

What exactly did Crypto VC experience in this cycle? During my investigation, I found several investors who are still active in the Web3 field. One statement from Jocy, the founder of IOSG, particularly struck me: "We still invest in 15 Web3 projects every year, 30% of which are lead investments, even in a bear market. In the first half of this year alone, we completed three primary investments."

This surprised me somewhat. In a bear market, are there still crypto VCs investing against the trend? What exactly are they investing in? And how have they managed to remain active for nine years in an industry where liquidity is rapidly waning?

The following is a personal account from Jocy, the founder of IOSG.

I worked as a VC at Web3 for nine years, experiencing three bull and bear market cycles.

I've been working with Crypto VCs for nine years.

Since founding IOSG in 2017, we've weathered three bull and bear market cycles in this industry, investing in nearly a hundred projects. Back then, the industry was still very small. Bitcoin had just broken $1,000, Ethereum was less than $10, and most people didn't even know what "blockchain" was.

At that time, we allocated about 80%-90% of our positions to early-stage projects.

However, with the changes in the crypto environment, we have gradually adjusted our investment strategy in the past two years, continuously increasing the allocation ratio of Post-TGE (after the project officially issues its token) and OTC (over-the-counter) projects. Currently, we have roughly formed an investment portfolio of 50% Level 1, 30% Post-TGE, and 20% OTC.

For us, the primary market remains the core source of alpha. However, we are increasingly finding that some post-TGE and OTC assets are clearly undervalued, and the secondary market is beginning to offer more cost-effective opportunities than the primary market.

At the same time, this strategy also gives us better liquidity management options and allows us to provide LPs (limited partners) with a clearer DPI (realized rate of return) exit path. I believe the future landscape will be: the top 20% of VCs who can clearly explain the DPI exit path to their LPs will take 80% of the funds in the market, while the remaining funds will share the scraps of the remaining 20%.

We currently have a dozen or so people, with teams spread across Asia and the United States. Our strategy has always been global, allowing us to keenly sense changes in the global industry landscape. The market is actually quite sluggish right now, and good projects are extremely scarce. Look at the Web3 startup scene in Silicon Valley; there are fewer and fewer newcomers truly working on pure crypto; a large amount of talent has been drawn to the AI ​​sector.

The market is currently in a pessimistic phase, and this pressure is unlikely to end anytime soon.

Every few years, the crypto industry undergoes a dramatic reshuffling, with institutions exiting, projects failing, and sentiment plummeting from euphoria to stagnation before a fresh start. For us, now is the perfect time to rebuild industry order and redefine value.

Every industry's lowest point is often the time when the best projects are conceived.

Many people think that VCs just invest money. But the institutions that truly survive in the long run are those that can help entrepreneurs solve problems. One of our biggest strengths over the past nine years is our post-investment capabilities. In addition, we've been consistently building an ecosystem. From infrastructure to DeFi, to consumers, and to the intersection of AI and crypto, we've been working on a complete ecosystem.

We hope that different projects can collaborate. This is something we have always valued highly.

Cryptocurrency venture capital (VC) is entering "hell mode".

How crazy was the industry at the peak of the last bull market? A seed-round project could be finalized in 3 days, with 5 institutions scrambling for quotas, and even the same project would receive 3 different valuations at the same time.

We never participate in that kind of game. That's not investing.

The market cooling down today has actually given institutions that genuinely conduct research an opportunity. We can finally sit down and do due diligence. We can spend three weeks, instead of three days, to thoroughly analyze a project.

Therefore, this round is actually about structural opportunities for research-driven funds. Because there is less money in the market, good projects will actively seek out institutions that can truly provide non-financial value, rather than those that blindly give high valuations. Our alpha comes from in-depth judgment, not from the speed of grabbing quotas.

Looking around, the entire industry is seeing a shrinking of funds.

A16z recently raised $2.6 billion in a fund, which is still a behemoth, but smaller than its previous fund. Large institutions like Benchmark are also downsizing.

US funds operate differently, often with a 10-year cycle. In the previous cycle, their main profits didn't necessarily come from investing in promising applications in the primary market, but rather from heavily investing in major cryptocurrencies like Bitcoin. They used their substantial dollar funds to push market valuations to their ceiling, but didn't provide the industry with a clear path to real-world application.

During the bursting of the bubble, US funds had ample funds and many options. However, Asian funds, having been pushed to their peak, found themselves with nowhere to go after the crash.

The past year has been disastrous for the VC funding market across Asia. The vast majority of VCs have struggled to raise funds. Almost no LPs would say they absolutely need to allocate to a Crypto VC.

Therefore, this round has been an extremely painful hell mode for Asian funds.

However, from another perspective, this also means that Asian funds must be more precise. Because ammunition is limited, every shot must hit its mark. Internally, we've always emphasized: don't invest in intermediate projects. Either invest in the top 1 or top 2 companies in the industry, or don't invest at all. Because in a bear market, the intermediate layer is most vulnerable to collapse.

The biggest problem in the cryptocurrency industry: tokens are out of sync with value.

During this cycle, we resolutely avoid several types of projects: infrastructure projects that rely solely on narratives but lack product-market fit (PMF), projects with excessive duplication of construction and no cash flow, and projects that rely purely on empty promises. The market has become completely immune to infrastructure tokens with "high FDV and low liquidity." Now, if you're doing infrastructure, institutions are even more inclined to invest in your equity than your tokens.

For a long time, the cryptocurrency industry has suffered from one major problem: tokens have been out of sync with their real value.

In the past, many project teams played a trick of "shedding their skin"—the real money-making business revenue and core equity were firmly locked in the real-world corporate entity; while the issued tokens were merely used as interest-free financing tools, liquidity outlets, or even chips to manipulate market sentiment.

To put it bluntly, the protocol earns real money on-chain, but token holders don't get a share. They have no real claim to the value created by the project. This extreme misalignment of interests has caused many investors to lose everything in the past few cycles. Because what they paid for was never a real "asset," but just an empty symbol without any defined rights.

After several rounds of brutal reshuffling, the industry is finally beginning to wake up: a good token must be one that can support real value.

High-quality projects are proactively seeking transparency, clearly and strongly linking tokens to protocol benefits. This will become a key differentiating competitive advantage in the next cycle. Projects like Uniswap, Hyperliquid, Polymarket, and Morpho (which we have invested in) are all actively promoting this trend.

For example, Morpho publicly promised the market that the value generated by the protocol would be directly accumulated to the tokens through programmatic settings, and would never flow to independent companies or equity. Similarly, Uniswap is also adjusting in this direction as the regulatory environment in the United States has loosened; while Hyperliquid has demonstrated the enormous power of "token buybacks" to the market through its actions.

Frankly, buybacks themselves aren't a perfect indicator of shared interests, but from an underlying structural perspective, they truly provide the token with core support. By continuously reducing the circulating supply, establishing a long-term interest-based relationship with token holders, and supplementing this with a transparent and programmatic buyback schedule, projects can forge a solid price base for their tokens. For long-term holders, the nature of these tokens is undergoing a qualitative change—they are increasingly resembling government bonds or interest-bearing assets, with their scarcity and intrinsic value steadily increasing over time.

Only tokens that truly possess value capture mechanisms, have the ability to generate revenue through buybacks, and have a bottom support are qualified to transcend bull and bear markets and become long-term financial assets, rather than purely speculative chips.

Perhaps it was precisely because the industry had fallen to its lowest point that Crypto was able to truly embark on this hardcore evolution of "distinguishing the genuine from the fake."

Truly great projects are born during the most pessimistic times.

Over the past few years, Crypto has actually undergone a massive "falsification" process, plummeting towards the worst possible outcome: Which products lack genuine demand? Which narratives are simply untenable? Where is Crypto destined to fall short of Web2?

This process of falsification buried countless sums of money and top talent, but it also gradually made the answer clear. For VCs, the investment logic must be completely changed—no longer betting on industry beta or cycles, but returning to the business itself.

We no longer view crypto as an isolated island, but rather as "the digitalization of finance." The industry has finally realized that what truly matters is not the illusory "big numbers," but the real value behind them. Now, when evaluating projects, we must break them down to an extremely fine granular level: meticulously examining the retention rate, acquisition cost (CAC), and lifetime value (LTV) of consumer projects; and dissecting the ARR (Annual Recurring Revenue) of already issued token projects layer by layer to extract sustainable, real income.

As Crypto transitioned from a storytelling, alternative circle to the real financial industry, a huge value gap emerged on the other side of the frenzy.

In today's market, people are more willing to pay for vague "imagination," while mistakenly underestimating projects that actually generate revenue, have users, and have cash flow. Examples include Morpho, Sky, and even Uniswap, which recently explicitly abandoned its IPO to focus on its token ecosystem. These established protocols, which have weathered complete bull and bear markets, lost attention during the deep pullbacks of the bear market, but their fundamentals not only didn't deteriorate, but actually became healthier as the industry environment and revenue capabilities improved.

This is why we are now allocating approximately 50% of our portfolio to these already-issued token projects with real revenue. We are focusing our efforts on two main areas:

• Real returns and financial infrastructure: This includes stablecoin payments, clearing and settlement, Neo-banks, and on-chain lending. For example, our investments in Ether.fi, Morpho, Centrifuge, and RedotPay all have very clear user needs and positive cash flow.
• The intersection of AI and Crypto: We have reserved 20% to 30% of our resources, not for general-purpose large models, but to focus entirely on crypto-native AI infrastructure (such as data training and collection).

Faced with this chaotic and brutal reshuffling, VCs themselves must evolve. Now, every colleague within our organization is equipped with a dedicated AI bot, which handles tedious data backtesting and cross-timezone collaboration. But our ability to interact with people and make fundamental judgments about human nature remains our irreplaceable competitive advantage.

After nine years, my biggest takeaway is that truly great companies are almost never born during the most exciting times, but rather when many people think the industry is doomed.

In this cycle filled with layoffs, disillusionment, and uncertainty, many are leaving, even beginning to doubt whether Web3 has a future. But it's only during downturns that you're forced to think: What do users truly need? What can survive in the long run?

I still believe that the truly important aspects of this industry are only just beginning. Those who remain after the bubble bursts will truly determine what the next phase of the world will look like.