Author | Azuma (@azuma_eth)
Who understands the current state of the cryptocurrency primary market best? Naturally, it’s the VCs still actively participating in the market.
In recent days, several investors from Pantera Capital, Crucible Capital, Blockworks, and Varys Capital engaged in a small-scale discussion on X about the current state of the primary market. Although their perspectives on the market's condition vary, their debate may help us gain a deeper understanding of the primary market's status.
Counterintuitive reality: VCs aren't short on capital, but there are few worthwhile investment opportunities.
On the evening of April 20, Meltem Demirors, partner and GP at Crucible Capital, posted a short article on X explaining why the number of funding rounds in the cryptocurrency industry has significantly decreased.
Demirors believes that, overall, the supply side of early founders and projects in the cryptocurrency industry is not as large as that of other high-growth sectors. Over the past four years, this gap has become increasingly evident, which is why this VC has begun shifting its focus beyond the cryptocurrency market.
The venture capital business in the cryptocurrency market has been developing for 10 years, but the truly proven areas that generate "VC-level returns" are still just a few—stablecoins/payments, exchanges, and financial products. For VC investors and frontline founders, today’s industry sees fewer breakout hits and longer cycles, raising the bar for industry insight, resilience, and long-term thinking—thus increasing the barriers from seed to Series A rounds.
While there are still some "generational" founders in the industry building category-defining companies (and it’s the VC’s job to find them and secure the opportunity to invest), the reality is that there is a clear gap between the stories founders tell and what VCs can reasonably invest in.
After Demirors' short article was published, it sparked discussions among many VC peers on the topic.
Several investors replied below agreeing with Demirors’s view. Among them, Mippo, co-founder of Blockworks, added a summary stating that he agrees with Demirors: the current issue in the primary market is a shortage of high-quality founders and projects; VC firms have more than enough capital to invest—but at the same time, early-stage VC funding is oversaturated, while funding focused on later-stage growth remains significantly insufficient.
Local disagreement: Where exactly is the funding concentrated?
Pantera Capital investor Mason Nystrom and Varys Capital venture lead Tom Dunleavy hold completely opposing views on whether VC funding is concentrated in the early discovery stage or the later growth stage, leading to an intense debate between them.
Dunleavy initially stated that he disagrees with Mippo’s view that “there is too much capital early on and not enough later”: “I would hold the exact opposite view. There is actually a lot of capital available for mid- and late-stage crypto VCs right now—mostly from recent and currently fundraising funds like Paradigm, Multicoin, Pantera, and Dragonfly—not to mention traditional VCs that have some exposure to crypto. The real shortage is in seed and earlier-stage funding focused on the industry… As long as you’re not entirely shifting your focus to AI, there are still plenty of interesting projects to invest in.”
But as an insider at Pantera, one of the later-stage VCs cited by Dunleavy, Nystrom strongly refuted Dunleavy’s claim, arguing that today, venture capital funding is increasingly concentrated in early-stage investments rather than Series A, Series B, or later rounds.
Nystrom did the math: if a fund wants to focus on Series A or Series B rounds, it needs to invest in at least 20–25 projects, each requiring substantial capital—approximately $15 million for Series A and $40 million for Series B. This means a Series A-focused fund would need at least $300 million in assets under management, while a Series B-focused fund would require at least $800 million. This calculation doesn’t even account for reserve capital, which typically requires holding 10%–50% of funds in cash—how many funds in the industry actually meet this requirement?
So currently, there may be at least 50 funds in the industry with assets under management below $100 million, while there are probably only around 15 funds with assets under management exceeding $400 million. True major players capable of participating in Series B and later rounds are extremely rare in the industry. While there may indeed be more Series B and later-stage funding in fintech areas such as stablecoins, these projects have long since “graduated” into the traditional VC ecosystem and can no longer be simply regarded as cryptocurrency market projects.
But Dunleavy was not convinced. In his response, he posted Galaxy’s Q1 primary market funding report and noted that the number of funding rounds across the industry in Q1 this year dropped by 49%, while the average deal size increased by 76% (to approximately $360 million)—total funding for seed and earlier rounds amounted to just $268 million; Series A reached $370 million; Series B surged to $1.1 billion; and later-stage rounds hit $2.72 billion (primarily driven by Kalshi and Polymarket).
Dunleavy countered by pointing out that data shows over 50% of industry investment in 2025 flowed into later stages (a record high), and in 2026, it reached over 80%.
Dunleavy last estimated the current funding landscape in the primary market—$6 billion to $7 billion in available capital for Series A and later stages, concentrated among five to six large institutions; and $1 billion to $2 billion in available capital for seed and earlier stages, spread across dozens of smaller, more dispersed funds.
Nystrom responded again, noting that the majority of the later-stage investments Dunleavy presented actually came from fintech-related projects that had already “graduated” and were long ago within the purview of traditional VCs and had received funding; they should not be counted as part of the industry’s internal activity.
Nystrom then continued to counter Dunleavy’s conclusion that “only five to six funds can invest in Series A and beyond, but dozens can invest in seed rounds”: “This means if you can’t convince just one of those six, you’re essentially out of luck; but in the early stage, as long as one out of dozens is willing to invest, you can survive. The ‘accessibility’ between these two is completely unequal.”
In addition, funds like Pantera Capital, which are capable of investing in later stages, also invest in seed rounds, but the reverse is not true. Moreover, with an increasing number of VCs transitioning into liquidity funds, the actual amount of capital available for later-stage investments in the industry is much smaller than the numbers suggest.
The real question isn't "Do you have money?" but "Where is the money, and can you access it?"
In summary, neither side could convince the other, but through this direct confrontation between two leading investors, we gained further insight into the reality of the cryptocurrency primary market—whether “there is money” doesn’t seem to be the core issue; rather, it’s “where the money is and whether you can get it.”
On the surface, industry funding remains robust, with even greater concentration in later-stage rounds; however, in practice, both VCs and entrepreneurs are navigating a market that is increasingly “structurally tighter”—early-stage capital appears dispersed but highly competitive, while later-stage capital, though abundant, comes with extremely high barriers to entry. This signals that the rules of the private markets are shifting. The era of closing funding rounds based solely on narratives, traffic, and short-term exits is rapidly fading; in its place is a financing environment that increasingly demands tangible business progress, long-term capabilities, and clear, deterministic growth pathways.
For VCs, this is a cycle of “fewer investments, greater judgment”; for entrepreneurs, it’s a survival test requiring longer cycles and higher barriers.