VC Paradigm Anxiety: From Asset Creation to Transaction Orientation: What's Next?

Tether has decided to step in to save the crypto VC industry. On September 24th, brokered by the family of U.S. Secretary of Commerce Lutnick, USDT issuer Tether intends to sell approximately 3% of its shares at a valuation of $500 billion, raising at least $15 billion. Prior to this, stablecoin startups raised less than $600 million in 2025, and according to Rootdata, the crypto industry as a whole raised only $13 billion. Crisis presents opportunities. Binance raised $2 billion in Q1 of 2025, followed by a relatively quiet Q2. The DAT treasury strategy gained popularity in Q3, and competition for Tether is expected in Q4. The market hasn't recovered, and the difficulties faced by crypto companies in raising funds and VC investment in crypto will continue. The amount of funding raised in the first half of 2025 has already surpassed the entirety of 2024. This doesn't mean that 2025 will be any better; 2024 was simply too bad. According to The Block, in 2024, just 20 VCs accounted for 60% of all LP capital, while the remaining 488 companies divided up the remaining 40%. This concentration reflects the disorder and fierceness of internal competition. The Collapse of the Asset Creation System The 2020 DeFi Summer began in 2018, and the 2025 Perp DEX War originated in 2022. The Federal Reserve has begun a cycle of interest rate cuts. In the past, this would have been a positive factor for on-chain and DeFi. The pressure on APRs to outperform US Treasury yields would be less, so funds would flow into high-yield products like trading and lending. However, in this cycle, if there are more cycles, the situation may not be as optimistic as before.

On the one hand, crypto products are deeply tied to U.S. Treasuries and the U.S. dollar. For example, the underlying returns of a number of YBS (yield-generating stablecoins) are not hedged by ETH, but U.S. Treasury bond interest + their own subsidies. On the other hand, the valuation system of on-chain assets has actually collapsed. The high FDV has defeated the pricing system of the Binance main site, and now only Binance Alpha is left struggling.

Thinking further along the valuation logic, there are only two situations in the crypto industry that are most profitable:

1. an absolutely small number of participants and relatively high capital liquidity. For example, during the DeFi Summer period, there were 1,000 people on the chain and 100,000 to 1,000,000 CEX buyers—>

   asset creationis the most profitable. The wealth-creating effect of issuing coins can cover VC investment and project operations. The 1,000-fold return rate of the first-class warehouse $Aave is not extreme, and it was just considered normal at the time.

2. For projects with an overwhelmingly large number of participants and unlimited capital liquidity, such as USDT, public blockchains ($BTC/$ETH), and exchanges (Binance/FTX/Hyperliquid), their network effects decrease in descending order. Even with USDT's billion-level user base, it still cannot rival internet super-apps.

Currently, family offices, pension funds, sovereign wealth funds, and internet giants are essentially no longer investing heavily in asset creation, instead prioritizing economies of scale. This also means that blockchain's reputation as a productivity technology has reached its peak, and it can only be valued as a large-scale fintech.

Image Caption: Asset Valuation and Market Value ComparisonImage Source: @zuoyeweb3

Correspondingly, the capital market still has illusions about aerospace (SpaceX) and AI (OpenAI/Anthropic), rather than relying on capacity and computing power to set prices.

Once a crypto company goes public, its valuation will collapse to that of fintech, and the market's verification of network effects continues to change. For example, Circle's USDC issuance is around $70 billion, while Tether's $170 billion is 1.7x that. However, Tether's valuation of $500 billion is 16x Circle's current market capitalization of $30 billion. Another example: Coinbase raised a total of approximately $500 million in six rounds of funding before its IPO, far less than Binance's single $2 billion round this year. Calculating the market capitalization of BTC/ETH further leads to the conclusion that crypto projects with strong economies of scale don't need to go public. However, this clearly doesn't align with current trends. DATs, ETFs, and IPOs are already unattainable exit methods for crypto VCs and projects. Continuing to break it down, the period from 2017 to 2021 saw a strong cycle of asset creation, a golden age for crypto VCs, both fame and fortune. However, after 2021, the situation changed rapidly, with exchanges becoming the main axis of industry development. In particular, the battle between FTX and Binance captured everyone's attention, including the regulatory community. Asset creation quickly shifted towards trading, with the core of all competition being the coin listing effect. The hot fundraising and bullish effects of CeFi and the altcoin season were all spillovers from the dominant position of exchanges. However, the collapse of FTX in mid-2022 changed everything. A VC that survived until its collapse in 2024 would have already made a respectable exit. Perhaps, guided trading is precisely a byproduct of the FTX collapse in 2022. Hyperliquid seized its opportunity, rejecting VC investment as an excuse; embracing market makers and institutions is the real focus. During the $USDH campaign, No Limit Holdings, Infinite Field, and CMI all revealed their involvement in HL market making. Before the complete DAT explosion in Q3 2025, Galaxy Research analyzed Q2 financing and revealed that companies founded in 2018 accounted for the majority of funds raised, while companies founded in 2024 accounted for the largest share of transactions. In other words, startups can get small amounts of funding to test the waters, but large amounts of capital will flow to market-proven companies. In Crypto terms, this is "crossing the cycle." Money ultimately flows to the well-heeled ox, and hardship ultimately flows to the hard-working horse. However, after Scroll's "runaway," the tech infra startup season has essentially come to an end. Even the stacking of ZK+ETH+L2 concepts can't guarantee returns, and presumably nothing can guarantee the future. To make matters worse, current flows don't guarantee future success. For example, the Perp DEX will launch in 2025, but if you didn't invest in 2022, there's no point in jumping in now. The battle for trading is over, and this won't be the market consensus going forward. Binance will have direct contact with all retail investors, and Hyperliquid doesn't mind outsourcing its front-end to Phantom. Liquidity is its moat, and network effects are constantly evolving. Thus, we can piece together the disconnect between industry development and VC investment. Compared to traditional internet industries, the crypto industry is much more cyclical, with a small cycle lasting only 2-3 months. However, VC investments in infrastructure often take 2-3 years to bear fruit. This means that after at least 10 small cycles, the track in which the VC invests must become mainstream, and the project in which the VC invests must become mainstream within that track. This double-edged sword is like a roller coaster ride. The impact on the trading system. The collapse of valuation logic will require a long time to rebuild. Perhaps everyone is a VC, and perhaps mergers and acquisitions are also exits. Currency has a time cost. VCs finance the information gap between primary and secondary markets. The liquidity of information ultimately returns excess profits. Classic IPOs and Binance's main website were both promised lands where money and tokens flowed. But now, either projects are IPO-ed or they switch directly to Alpha. One thought leads to heaven, the other to hell. ABCED has simply shut down. Whether it's DATs, ETFs, or mergers and acquisitions, VCs are no longer acting as "dream makers" but more like capital providers. For example, DATs raised $20 billion in total funding this year (excluding Strategy), yet Peter Thiel invested in ETH in the US, Huaxing can only buy BNB in ​​Hong Kong, and Summer Capital is limited to managing $SOL DAT. This isn't normal. While trading is concentrated in BTC/ETH, DATs are beginning to spread to smaller cryptocurrencies. Perhaps altcoins are a rigid demand, and beyond the Tier 1 market, there are more ways to play. The only problem is that most DATs and VC capital providers can't artificially create a 1,000x return.

The deeper crisis lies in the fact that financing does not necessarily require VC participation, especially non-US VC participation. Polymarket acquired the CFTC-registered exchange QCEX and returned to the US market. Tether launched the Genius Act-compliant stablecoin USAT and returned to the US market. ETFs and DATs also primarily occur in the US stock market. Trading is no longer a competition between superior matching engines, but rather a test of capital operation maturity. So-called compliant exchanges are more like creating barriers to entry for newcomers, while charging exorbitant fees behind closed doors. Beyond financing, industry brands are also beginning to align with each other, as evidenced by the 2024-2025 M&A cycle. Coinbase acquired Deribit to expand its options market, Phantom acquired the wallet tool Bitski, the security product Blowfish, and the trading tool SolSniper. Even Stripe is acquiring the wallet service Privy and the stablecoin tool Bridge. Whether it's Coinbase's vision of "Everything Exchange" or Hyperliquid's slogan of "House All Finance," the distinction between CEX and DEX is no longer meaningful. The focus of trading is no longer on connecting with retail investors, but on providing more mainstream or long-tail trading options and liquidity! Liquidity is still liquidity!

Therefore, Coinbase will tie up with Circle to issue USDC, and Hyperliquid will play with $USDH on its own. What they value is not the scale effect of stablecoins, but the customer acquisition and retention capabilities of stablecoins. This is the biggest difference between them and USDT.

VC's perspective on USDT: although investing in Tether is expensive, it is a sure win;

USDT's open fundraising this time:

1. Open fundraising during a period of low interest rates, using external funds to develop its own diversified business

2. Give Chuanbao related entities an opportunity to enter, referring to Binance's use of USD1 for financing

3. It is expected to cope with more fierce competition from stablecoins, especially YBS's profit-sharing mechanism, which requires both blocking Circle and responding to Ethena

Guided transactions will become a common feature of capital flows in 2025, but this is not the future. DAT, margin trading, LP, stablecoins, and RWA all lack imagination, and participate in Perp DEX Or perhaps stablecoins are just a vain choice for working professionals. VC, ultimately, is a manual process, requiring bets on future "feelings" and "trends," dispelling the mystique of underlying technology, network effects, and current hot topics, and seeking long-term PMF. A thousand-fold return depends on the next "global application." What lies beyond stablecoins, exchanges, and public blockchains? The mining industry has reached a critical mass. The future of mining lies in data centers, or perhaps a change to Bitcoin's economic model—simply charging transfer fees. Unlike transaction fees, which maintain the Bitcoin network, transfer fees protect user interests. Every aspect of transaction-related transactions has been monopolized by existing giants. Challenging Coinbase, Hyperliquid, and Binance is nearly impossible. Engaging in peripheral activities around them or becoming part of their ecosystem is more feasible. It's worth noting that the dominance of exchanges and market makers is an illusion, valid only within the Binance ecosystem. They're also weak in higher-dimensional capital flows. Market makers aren't strong in areas like ETFs, DATs, and M&A. This is especially true for the secondary returns of BTC/ETH. Exchanges and market makers are no smarter than others. If they remain enthusiastic about stablecoin financing, the only question is how they plan to counter USDT's first-mover advantage and network effects. This isn't a difference in funding volume, but rather a shift in consumer behavior. Traditional internet platforms can burn cash to acquire market share—for ride-hailing, food delivery, and local lifestyle services—but how to encourage people to switch financial assets remains a question we haven't yet devised. Given the current dilemma, trading-oriented approaches won't be a key focus of future innovation, as we haven't yet devised forms of interaction beyond trading.

Conclusion

The crypto industry is undergoing fission. It must go beyond the Fintech valuation framework and embrace global applications to have a future. But now it has come to a fork in the road. Will the future be more, more frequent, and more mainstream transactions, or broader uses (blockchain, stablecoins, RWA, Web3)?

Preliminary summary of the VC industry in 2025:

1. Broken cycles, mainstream transactions (BTC/ETH), and centralized investments

2. It is difficult for crypto companies to raise funds, it is difficult for crypto VCs to raise funds, and the valuation system collapses

3. From investment to capital allocation, the intermediary attribute is enhanced, and the interaction with the secondary market is reduced

4. The main axis is dispersed, Q1 Binance, Q2 dispersion, Q3 DAT, Q4 stablecoin

The current situation is very similar to the collapse of the crypto bubble at the beginning of the century. People need to rebuild the old mountains and rivers. Facebook, Google, and Apple are all products after the summer of the bubble. For counter-cyclical investment, perhaps look at Arthur Hayes?

In a word,we need the Peter Thiel of the encryption age, not the a16z of the Internet age.