From "token fantasy" to "income reality," the logic of crypto investment is undergoing a brutal shift.

According to Mars Finance, on February 9th, Bloomberg published an article stating that the plunge in crypto asset prices and the surge in market mergers reveal the problems within the crypto industry. While it flourished during a speculative boom, it struggled to build sustainable, revenue-generating businesses. Today, crypto venture capital is being pushed towards more traditional startup logic: product-market fit, profitability, and long-term user retention. Despite the White House's pro-crypto stance and a relaxed regulatory environment, the flywheel of token-driven venture capital logic—retail demand—has dried up. Native crypto funds are shifting towards better-performing areas in the market, including stablecoin infrastructure and on-chain prediction markets, while some funds are also expanding into adjacent areas such as fintech and artificial intelligence. However, with traditional institutions continuing to enter the market, native crypto expertise alone is far from sufficient. "The market is consolidating around something that truly works," said Santiago Roel Santos, founder and CEO of cryptocurrency private equity firm Inversion. "As a category, Web3 is currently largely devoid of investment value. People have shunned NFTs, games, and those uninnovative, barely-there next DeFi platforms. Even well-funded crypto-native VCs are heavily shifting towards fintech, stablecoins, and prediction markets. Everything else is struggling to gain attention." Native crypto funds like Mechanism Capital and Tangent have begun to focus on deep tech, including investments in bot startups like Apptronik and Figure, marking a shift in investment focus away from the core of crypto. Funds are pulling away from high-stakes bets on NFTs, Web3 social platforms, and blockchain games—speculative narratives that defined the early-cycle. Metrics now underscored—revenue, user retention, and willingness to pay—were often overlooked in the early stages, when narrative buzz, token liquidity, and market share became substitutes for measuring project appeal. Catrina Wang, general partner at Portal Ventures, says this has led some native crypto VCs to expand into fintech or artificial intelligence. “I wouldn’t be surprised if we see more funds quietly closing or downsizing,” said Tom Schmidt, general partner at venture fund Dragonfly. “They also face fierce competition from traditional VCs for the hottest deals in the Web 2.5 space.”