In the previous article, Portal Labs had a brief discussion with everyone about ABCDE stopping investment in new projects and outlined the main paths and participation mechanisms of Web3 investment.
In this article, we will discuss the overall trends of Web3 investment.
In fact, as early as the second half of 2024, many Web3 media and veteran practitioners began to put forward a common view:The VC model of Web3 has become increasingly difficult to execute.
Although there are some perspectives, such as Haseeb Qureshi, managing partner of Dragonfly Capital, who believes that the VC situation is not so pessimistic and the crypto VC prospects are still promising. However, it is undeniable that from data and market sentiment, the primary market is indeed experiencing a profound structural adjustment.
Moreover, this trend has shown signs of further acceleration in 2025.
Ebb Tide of the Primary Market
In the second half of 2024, while the Web3 secondary market was fascinated by MEMECoin and going crazy for BTC, the primary market had already entered the Crypto Winter.
Galaxy Digital data shows that crypto VC fundraising peaked at $33.7 billion in 2021, still at $27.7 billion in 2022. However, in 2023, the fundraising scale plummeted to $10.1 billion, a year-on-year decline of over 60%; entering 2024, this figure further dropped below $4 billion.
An important reason for this predicament is that crypto VC itself is only conducted within a small internal circle and has not fully integrated with the mainstream financial market, with limited capital. At the same time, crypto VC also needs to face a longer exit cycle, often encountering the problem of "locked for a year, losing half" in a highly volatile crypto market.
STIX Co's data shows that from May 2024 to April 2025, multiple primary locked tokens plummeted in value after unlocking, with an average valuation shrinking by over 50%. BLAST, EIGEN, and SCR tokens dropped by 88%, 75%, and 85% respectively. According to crypto KOL @Anymose 96's statistics, the maximum price drop of ABCDE's invested and issued projects reached 95.5%.
If lockup is a nightmare for primary investors, the fundamental problem of the primary market is the vicious cycle of financing-listing-dumping.
In the previous bull market, primary investment had a clear value transmission chain: VCs enter at a low point, project parties complete financing, then the token is listed, the secondary market takes over, and the token price gradually rises under market consensus, ultimately achieving exit. However, in the current cycle, with liquidity shrinking and narrative fatigue, this chain has been completely broken.
Project parties and VCs have to list tokens prematurely when market sentiment is low to complete their exit. However, after listing, lacking secondary market buying power, token prices often directly crash. Once the primary investors' lockup period ends, they rush to "dump and cash out". The entire chain becomes a game with no winners: primary investors suffer losses, project parties' reputation is damaged, and secondary investors are unwilling to take over.
According to SoSoValue data, newly listed crypto projects in 2023-2024 dropped an average of 45% within 90 days, with 60% breaking below issue price within six months. Whether star projects or second-tier projects, they can hardly escape this valuation system's collapse.
This is not just a market heat issue, but a failure of model design.
Revival of Incubation Model
If the primary market's dilemma reveals the failure of the crypto VC approach, the rise of incubation-type investment is a microcosm of how capital is currently seeking a "breakthrough".
Du Jun's recent transformation is a vivid representative of this trend. After announcing that the ABCDE fund would no longer invest in new projects, he did not completely exit but started over, launching an incubator called Vernal. Du Jun was very direct: he wants to accompany teams with a sense of mission, incubating enterprises that can truly create long-term value for the industry and society. Moreover, in addition to incubating projects, he will personally engage in secondary market allocation, releasing his buy list in May - industrial synergy + secondary investment, with a very clear strategy.
Of course, this is not just his choice alone.
Over the past year, platforms like Binance Labs, OKX Ventures, and Alliance DAO have been continuously increasing their incubator model investments. Compared to pure capital investment, they are more like project "co-builders": providing everything from funds and technology to market and compliance. According to Business Research Insights, the global Bitcoin project incubator market size reached $1.43 billion in 2024, expected to rise to $5.7 billion by 2032, with a compound annual growth rate of 19.1%. This growth rate indicates the continuing expansion of crypto incubator demand.
Why is the incubation model becoming popular?
VCs are more like "funds + accompaniment", while incubators are comprehensively involved: from resources, market to product synergy, even technical stack, user acquisition paths, and exchange resources, project parties are almost "tied" to the incubator, with much deeper moats.
Incubators don't need to exit through high valuation listings: besides token issuance, they have multiple exit methods like internal ecosystem absorption, product profitability, and phased token circulation, with more flexible gameplay, less likely to be dragged down by market conditions.
Capital requirements are also flexible: unlike VCs that typically start with millions, incubators can lower cash input by exchanging "resources for equity/Token", saving liquidity and improving capital efficiency.
Of course, incubation is not something "anyone can play". It demands much more from investors: understanding technology, market, and how to help projects grow - having money alone is not enough. Du Jun's transition from VC to incubation is based on years of accumulated industrial resources and team capabilities, able to truly help projects take off.
Secondary Market Development
If the incubation model provides a "rebuilding path" for the primary market, the secondary market is undoubtedly the most realistic safe haven for current funds.
The Block Research data shows that the total spot trading volume of the crypto secondary market in 2024 has rebounded to nearly $13 trillion, a year-on-year growth of about 40%. Among them, mainstream assets like BTC and ETH remain the majority, but you'll find that narrative-driven, high-volatility small and medium-cap assets like Meme coins, AI, and DePIN are increasingly becoming new focal points for capital.
However, this round of secondary market "heat" is quite different from the previous one:
Institutional Entry, Strategy-Driven
In this market trend, retail investors are not the protagonists; what truly supports the market is an increasingly mature institutional strategy.
CoinShares data shows that crypto asset management (AUM) rose to $67.4 billion in 2024, a year-on-year growth of 160%. Especially after the BTC spot ETF approval, traditional financial institution funds have massively poured in, driving BTC's steady rise and stabilizing the market's foundation. However, with these funds' entry, the crypto market's rhythm has also changed.
The market is no longer solely driven by retail investor sentiment fluctuations but is more like a rhythmic, strategic game - arbitrage, hedging, and options have become mainstream approaches.
Liquidity Reigns, Narrative Sidelined
MEMECoin, AI, RWA, and other sectors with strong liquidity and high volatility have become the secondary market's key focus, reflecting the market's extreme pursuit of liquidity.
Although many voices currently criticize speculative behavior, it is undeniable that the current crypto market still prioritizes speculation (after all, who doesn't want to make quick money).
According to CoinGecko data, the daily average trading volume of the MEME Coin sector from Q4 2024 to Q1 2025 reached $1.5 billion, accounting for 13% of the overall crypto market trading volume. Although emerging narrative assets such as RWA and AI have a market capitalization share of less than 10%, their average volatility is more than twice that of mainstream cryptocurrencies.
The logic behind this is that investors are no longer betting on long-term value, but instead trying to chase liquidity and recoup funds or obtain higher profits in short cycles.
Choices of Web3 Investors
Although we see that the VC model is currently experiencing a severe setback, the existence of market cycles has never changed - crypto VCs have not been the first to enter a Crypto Winter, nor will they be the last.
Looking back at PitchBook's historical data, during the 2018 Crypto Winter, the total global crypto VC investment was only $2 billion, but by 2021, this figure soared to $33.7 billion, growing nearly 17 times in three years. As cycles rotate, the path of capital flow will change with the times, and VCs will eventually reappear as the market recovers.
However, for high-net-worth investors today, choosing the right path remains a practical issue.
The advantage of the incubation model lies in deep synergy, helping projects grow through full-chain binding of resources, technology, and market, with potential returns far exceeding traditional VCs. However, this also means requiring more industrial resources and collaborative capabilities, suitable for investors who can deeply participate in project development.
The secondary market offers higher liquidity and strategic flexibility. Institutionalized and strategized secondary markets allow high-net-worth investors to participate flexibly through structured products, custody allocation, etc., without being locked in.
However, regardless of choosing primary, secondary, or incubation markets, each path cannot avoid a core issue:Compliance.
Especially as global crypto regulation becomes increasingly strict, compliance requirements, legal risks, and tax arrangements vary across different paths. For example, primary market fundraising compliance, token issuance location selection, secondary market cross-border transactions, tax compliance, and interest disclosure in incubation models - each step touches on investors' bottom-line safety.
In Portal Labs' view, compliance is not only a mandatory course for risk prevention but also a moat for crossing cycles and making stable layouts.
Therefore, in the next article, we will continue to explore the compliance issues behind investment paths - what are the differences in compliance requirements for different investment paths? How should high-net-worth investors steadily respond in the current environment of accelerated regulation? Stay tuned.
