Crypto venture capital firms are adopting a more cautious approach to investments, moving away from speculative trends and placing greater emphasis on genuine utility and sustainable growth. Industry leaders say the days of chasing every new “Ethereum killer” or Layer 1 blockchain project are over, as investors demand stronger fundamentals and proven adoption.

A Shift Towards Disciplined Investment

According to Sylvia To, director at Bullish Capital Management, venture capitalists in the crypto space are “a lot more careful now.” Speaking at Token2049 in Singapore, To explained that investors no longer view blockchain projects purely as narrative plays.

“In the past, you could just throw a cheque at a project and claim it was the next big Layer 1,” she said. “But now, the market has evolved. You saw all these new chains forming and the ecosystem becoming fragmented, yet few had real users.”

To noted that the reckless enthusiasm that once defined crypto VC behaviour has given way to a more analytical mindset. Investors now want clear answers to questions like: “Who is actually using this infrastructure?” and “Are there enough transactions or volume to justify the valuations?”

Market Fragmentation Forces a Reality Check

The influx of capital into countless new blockchains and infrastructure projects during the last bull cycle led to severe market fragmentation. Many projects raised funds based on hype rather than tangible adoption.

18 crypto projects collectively raised $312 million during the week ending Sept. 29. Source: Messari

“We’re at a stage where you can’t just bet on every new idea,” To said. “There’s been a lot of money raised for infrastructure that nobody is using. In 2025, we’re seeing startups raising funds at inflated valuations based purely on projections that aren’t backed by real revenue.”

According to To, this trend is no longer sustainable. “The potential revenue and pipeline many of these projects highlight aren’t solidified. It’s been a slow year for the sector overall,” she added.

A New Era of Selective Funding

Eva Oberholzer, chief investment officer at Ajna Capital, echoed To’s assessment. Speaking on September 1, Oberholzer observed that crypto VCs have become far more selective about where they allocate capital.

“The focus has shifted towards predictable revenue models, institutional participation, and irreversible adoption,” she said. “This is a sign of market maturity rather than decline.”

The new investment mindset prioritises resilience and measurable performance over hype-driven opportunities. Many venture firms are seeking to back startups that can demonstrate clear use cases, recurring income, and the potential to thrive even in less bullish conditions.

Funding Declines Sharply in 2025

Data supports this changing sentiment. Galaxy Research’s latest venture capital report found that crypto and cstartups collectively raised $1.97 billion across 378 deals in the second quarter of 2025. That represents a 59% decline in funding and a 15% drop in deal count compared with the previous quarter.

Overall, total VC investment into the crypto sector during the three months ending June stood at $10.03 billion. Analysts suggest the reduction in funding reflects both market caution and a maturing investment landscape.

While many investors are pulling back, a few large players continue to make bold moves. One notable example is Strive Funds, the asset management firm founded by American entrepreneur and politician Vivek Ramaswamy. The company raised $750 million in May to pursue “alpha-generating” strategies through Bitcoin-focused investments.

The Industry Grows Up

The tightening of crypto venture capital flows signals that the industry is entering a more disciplined phase. Whereas the 2020–2022 bull market was defined by speculative bets on “next big thing” narratives, 2025 appears to be the year of accountability and practical assessment.

As To summed up, “It’s no longer enough to have a flashy whitepaper or a promising roadmap. You need real users, real adoption, and sustainable growth. The market has matured — and so have the investors.”

With funding harder to secure, crypto startups are being forced to focus on delivering tangible results rather than selling visions of future success. In the long run, that discipline could strengthen the entire sector, even if the short-term effects are painful for founders chasing easy capital.