Asian Venture Capitals' Recalibration In Crypto Investment

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Author: Liam, Founder of TechFlow

"All in Crypto :)", said Shen Nanpeng, head of Sequoia China, in a WeChat group in 2021. The screenshot made its way through investment circles, becoming a rallying cry that captured the prevailing market sentiment.

It was the height of crypto optimism. Coinbase had recently completed its public listing on NASDAQ, FTX was widely regarded as a rising force in finance, and traditional venture capital firms across the board were positioning themselves as champions of the digital asset space. The enthusiasm was palpable.

Industry observers called it "a once-in-a-generation technology shift." Sequoia's statement became emblematic of that particular market cycle – a moment when institutional confidence in crypto reached its peak.

Today, four years later, the landscape looks markedly different. Many of the firms that embraced Web3 with such conviction have since stepped back from the space. Some have reduced their crypto exposure significantly, while others have redirected their focus toward emerging opportunities in artificial intelligence.

This shift reflects the natural ebb and flow of investment cycles – capital moves where opportunity appears strongest, and sentiment can change as quickly as market conditions.

The question remains: how have the Asian venture capital firms that once championed Web3 adapted to this changing environment?

Pioneers of the Wild West Era

When Coinbase went public on NASDAQ in 2021, IDG Capital's early angel investment in the crypto exchange had generated an estimated thousand-fold return. The bet, placed back in 2012 when Bitcoin traded at just over ten dollars, exemplified how traditional venture capital firms became the backbone of the early crypto ecosystem.

Between 2012 and 2014, established venture capital firms dominated Web3 investments while crypto-native VCs were still emerging. Major Chinese exchanges secured backing from prominent traditional investors during this period. In 2013, OKCoin raised funds from Tim Draper and Gang Mai, while Huobi secured investment from ZhenFund, followed by Sequoia China the following year. By 2018, Sequoia China held a 23.3% stake in Huobi, making it the second-largest shareholder after founder Leon Li.

The same year saw a pivotal moment for Binance's future. Lightspeed Venture Partners' Darong Cao introduced Bitcoin to Changpeng Zhao during a poker game, advising him to "dive into Bitcoin or blockchain entrepreneurship." Zhao subsequently sold his Shanghai apartment to all-in Bitcoin, founding Binance in 2017. Angel investor Lijie Wang's 200,000 yuan investment in domestic blockchain project NEO in 2014 would later become what he called "the most important investment of his career."

The ICO wave of 2017 transformed the investment landscape. Wang, having already profited from NEO, sold his holdings at 1.5 yuan only to watch the token surge to over 1,000 yuan – a 6,000-fold increase over three years. The experience drove Wang to aggressive blockchain betting, claiming he invested "an average of $2 million worth of Ethereum daily" while maintaining a grueling schedule of project meetings and whitepaper reviews.

At a January 2018 blockchain summit in Macau, Wang declared: "I've made more in the past month than in the previous seven years combined." Around the same time, ZhenFund founder Xiaoping Xu issued an internal memo calling blockchain "a great technological revolution where those who follow it will prosper, and those who resist will perish."

The ICO bubble's collapse in 2018 sent shockwaves through the industry. Bitcoin plummeted from nearly $20,000 to just over $3,000, while thousands of tokens crashed to near-zero values. The crash transformed crypto from a wealth creation vehicle into an industry punchline. Former blockchain entrepreneur Leo recalls attending a Beijing venture capital event where a VC partner joked about failed startups launching tokens instead, drawing laughter from the audience.

"The entire industry hit pause in the second half of 2018," Leo explains. "Once-buzzing WeChat groups fell silent overnight, and even I thought the industry was finished." The March 12, 2020 market crash, which saw Bitcoin lose 50% in a single day, further cemented crypto's fall from grace among traditional investors.

Despite the subsequent volatility, the early involvement of traditional VCs like Sequoia Capital and IDG proved crucial in establishing the crypto ecosystem's foundation. Their backing of major exchanges, mining companies like Bitmain, and wallet providers like imToken helped legitimize the nascent industry during its most uncertain period. However, the dramatic boom-bust cycles that followed would fundamentally reshape how traditional venture capital approaches digital assets, setting the stage for today's more cautious institutional stance toward crypto investments.

Re-entering Crypto

Looking back, March 12, 2020 marked the darkest valley bottom for the crypto industry in nearly a decade. Social media feeds were flooded with blood-red candlestick charts, and people thought this was the final blow that would end the industry for good.

But the turnaround came unexpectedly and violently. The Federal Reserve's flood-like monetary easing pushed the once-dying market to new heights. Bitcoin soared from its lows, gaining over 600% in a single year and transforming into the most dazzling asset of the post-pandemic era.

However, what truly made traditional VCs take crypto seriously again was perhaps Coinbase's public listing. In April 2021, the nine-year-old exchange rang the NASDAQ bell. It proved that "crypto companies can go public too" and delivered thousand-fold returns to early investors like IDG. The sound of Coinbase's bell echoed between Wall Street and Beijing's financial district. Crypto media personality Liam recalls that many traditional VC professionals reached out to him afterward for offline discussions about the overall crypto landscape.

But in Leo's view, traditional VCs' return wasn't solely driven by wealth effects. "These people naturally wear elite masks. Even if they secretly bought some coins during bear markets, they wouldn't publicly admit it," he explains. What really helped them remove their masks was the narrative upgrade: from Crypto to Web3.

This was a conceptual transformation heavily promoted by a16z crypto's Chris Dixon. Directly saying "investing in crypto" seemed like speculation to many, but switching the term to "investing in the next-generation internet" immediately added a sense of mission and moral legitimacy. Criticizing Facebook and Google's monopolies while emphasizing decentralization and fairness could easily win support and applause. The DeFi craze and NFT explosion could all be seamlessly integrated into this grand narrative framework.

Will, a crypto fintech investor at a top-tier firm, recalls: "We went through a cognitive shift. Early on, we treated it as an extension of consumer internet, but that logic was proven wrong. What really changed our perspective was fintech." In his view, the Web3 hype explosion occurred precisely between the tail end of mobile internet and the early stages of AI. Capital needed a new story, so blockchain was forcibly fitted into the internet framework. But what truly pulled the industry out of its death spiral was the awakening of its financial attributes. "Look at successful projects – which ones aren't finance-related? Uniswap is an exchange, Aave is lending, Compound is wealth management. Even NFTs are essentially asset financialization."

Another catalyst came from FTX. Founder SBF emerged as a "financial genius prodigy," capturing the hearts of almost all major traditional VCs. His positive persona and rapidly inflating valuation ignited FOMO emotions among VCs globally. At venture capital gatherings in Beijing, investment moguls were frantically asking "who can buy FTX and OpenSea secondary shares" while envying those lucky enough to have already acquired them.

This period also saw an interesting phenomenon: talent flow between traditional and crypto VCs. Some left Sequoia and IDG to join emerging crypto funds, while others moved from crypto VCs to traditional institutions, directly taking on "Web3 Lead" titles. This two-way flow of capital and talent brought crypto markets into mainstream investor narratives for the first time.

The 2021 bull market was like a carnival. WeChat groups buzzed with activity, but unlike before, they now included traditional VCs, family offices, and big tech employees. NFTs were all the rage, with VC moguls switching their profile pictures to high-value NFTs like apes and CryptoPunks. Even Zhu Xiaohu, who once criticized crypto, switched to a monkey avatar. Offline conference venues, previously dominated by crypto-native entrepreneurs, began featuring polished traditional VC partners.

Traditional VCs entered Web3 through various approaches: directly investing in crypto projects, sending valuations soaring; acting as LPs in crypto VCs – Sequoia China, once in legal battles with Binance, reportedly became a Binance Labs LP after their reconciliation; directly purchasing Bitcoin in secondary markets. Crypto VCs, traditional VCs, exchanges, and project teams became intertwined, continuously pushing up project valuations. Everyone anticipated an even more glorious bull market, but beneath the fanfare, risks were quietly brewing.

The Great Escape

If 2021's bull market was heaven, then 2022 instantly became hell. FTX made it, and FTX broke it. The collapse of LUNA and FTX not only destroyed market confidence but directly dragged down a batch of traditional VCs. Institutions like Sequoia Capital and Temasek suffered heavy losses, with Temasek, as state capital, even facing accountability questions in Singapore's parliament.

After the bull market bubble burst, numerous previously high-valued crypto projects were knocked back to reality. Unlike crypto-native VCs' "pooling money" approach of cautious testing, traditional VCs were accustomed to big bets, often investing tens of millions of dollars in single deals. They also purchased large quantities of SAFTs from crypto VCs, becoming important exit liquidity for crypto VCs in the previous cycle.

What made traditional VCs even more disheartened was that the crypto industry's narrative changes happened faster than their investment logic could handle. Projects once held in high regard could be completely abandoned by the market within months, leaving investors with nothing but deeply underwater equity and liquidity predicaments.

The Ethereum L2 sector serves as a typical example. In 2023, Scroll completed funding at an $1.8 billion valuation, with Sequoia China and Qiming Venture Partners on the investor list. However, on September 11 this year, Scroll announced the suspension of DAO governance and core team resignations, with total market cap remaining at only $268 million - an 85% loss for VC investments.

Meanwhile, the dominant position of exchanges and market makers made VCs seem increasingly redundant. Investor Zhe stated bluntly: "For projects valued under $30-40 million, those that eventually list on Binance can still make some money - maybe 2-3x returns after the lockup period ends. But anything more expensive that can only list on OKX or smaller exchanges results in losses."

In his view, profit logic has long been disconnected from the projects themselves, depending only on three factors: whether it can list on Binance, whether the token structure is favorable, and whether project teams are willing to "feed the market." "Exchanges have the biggest say anyway and get the biggest piece of meat. How much others can share depends on luck."

Zhe's words capture the pain of many traditional VCs. They discovered their role in the primary market increasingly resembled "porters" - spending money to invest in projects, only to see exchanges harvest the greatest value while they received table scraps. Some investors even lamented: "We don't really need primary markets anymore. Project teams can make money by listing on Binance Alpha themselves - why would they still share profits with VCs?"

As capital logic failed, traditional VCs' focus also shifted. As Will noted, Web3's popularity occurred precisely between the tail end of mobile internet and AI's early stages - a "gap period." When ChatGPT emerged, the real North Star appeared. Capital, talent, and narratives instantly pivoted toward AI. In social media feeds, VC professionals who once actively shared Web3 funding news quickly adopted "AI investor" identities.

Former traditional VC investor Zac observed that during the industry's peak in 2022-2023, many traditional VCs were looking at Web3 projects, but now 90% have stopped. He predicts that if the Asia-Pacific crypto primary market maintains its current sluggishness for another six months to a year, even more people will abandon the space.

No More Big Bets

The Web3 primary market in 2025 appears to be contracting, with excitement fading and only a handful of players remaining. However, beneath the surface, the landscape is quietly reshaping itself.

Sequoia Capital, a bellwether for traditional venture capital, continues to draw attention with its strategic moves. Data from Rootdata reveals that Sequoia China invested in seven projects throughout 2025, including OpenMind, Circle Technology, Donut, ARAI, RedotPay, SOLO, and SoSoValue. IDG Capital, GSR Ventures, and Vertex Ventures followed in investment activity, while previously active Qiming Venture Partners made its last Web3 investment in July 2024.

"Among traditional VCs still looking at Web3 projects now, you can count them on one hand," observes Zac, highlighting the dramatic reduction in institutional interest. He points to a concerning decline in crypto project quality, noting that "teams that work hard to find product-market fit and create long-term value for users receive far less positive feedback than those drilling into attention economy and active market making."

The emergence of crypto treasury companies like MicroStrategy and BMNR has created a new investment category, but this development is further draining the already depleted crypto primary market. Wang Yuehua, partner at Draper Dragon, explains the scale of this shift: "Do you know how many PIPE projects are in the market now? At least 15, each needing an average of $500 million. That's $7.5 billion."

PIPE transactions, where listed companies issue stocks or convertible bonds to institutional investors at discounted prices for rapid financing, have become increasingly attractive. Many companies previously unrelated to crypto have secured large-scale PIPE financing to purchase substantial amounts of BTC, ETH, SOL and other digital assets, transforming themselves into crypto treasury companies. Investment firms entering at these discounted prices often see significant returns.

"This is why the primary market has no money," Wang Yuehua explains. "Big capital is all playing PIPEs with higher certainty. Who wants to risk investing in early stage?"

Despite the exodus, some investors remain committed to the space. Will continues to believe in both Web3 and AI, even expressing willingness to invest in projects that appear to lack traditional business models but serve as public goods. "Not everyone has to do business," he argues. "Truly great projects often begin as simple public goods. Like Satoshi creating Bitcoin - he didn't pre-mine, didn't fundraise, but created the most successful financial innovation in human history."

The Silver Lining

Several major events in 2025 are changing the rules of the game.

Circle's public listing has acted like a spark, igniting both stablecoins and RWA (Real-World Assets) sectors simultaneously. The stablecoin issuer went public on the New York Stock Exchange with a valuation of approximately $4.5 billion, providing traditional VCs with a long-awaited "non-tokenized" exit example. Subsequently, Bullish, Figure and others went public, boosting investor confidence further.

"We don't touch pure token primary or secondary markets, but we look at stablecoins and RWA," multiple traditional VC investors share the same view. The reasoning is straightforward: large market opportunity, visible cash flows, and clearer regulatory pathways.

Stablecoins operate with a more "banking-like" business model, generating revenue through reserve fund interest spreads, issuance/redemption and settlement fees, and compliance custody and clearing network service charges, naturally possessing sustainable profitability potential. RWA brings receivables, government bonds, mortgages/real estate, and fund shares "onto the blockchain," earning revenue from fees and spreads across multiple stages including issuance, matching, custody, and circulation.

While the previous generation of crypto companies listed on US stock exchanges were primarily exchanges, mining companies, and asset management firms, the new generation's prospectuses belong to stablecoins and RWA.

Meanwhile, the boundaries between stocks and tokens are becoming increasingly blurred. The "MicroStrategy-style" treasury strategy has attracted numerous imitators, with listed companies raising capital through equity financing or PIPE offerings to allocate into leading assets like BTC, ETH, and SOL, transforming themselves into "crypto stocks."

Behind the leaders in this sector, numerous traditional VCs like Peter Thiel can be seen, with some institutions even entering directly. China Renaissance Capital announced a $100 million purchase of BNB, choosing to participate in crypto asset allocation through public market methods.

"The traditional financial world is embracing crypto," says Wang Yuehua. "Look at Nasdaq investing $50 million in Gemini - this isn't just a capital move, but an attitude shift."

This transformation is also reflected at the LP level. Multiple interviewees reveal that traditional LPs including sovereign wealth funds, pension funds, and university endowments are beginning to reassess the allocation value of crypto assets.

Ten years of capital history have risen and fallen like tides. Asian traditional VCs once pushed exchanges onto the stage and collectively shouted "All in" during bull markets, only to eventually become marginal players in the crypto world.

Currently, while reality appears subdued, the future may not lack dawn. As Will firmly believes: "Traditional VCs will definitely allocate more to fintech investments related to crypto."

Whether traditional VCs will enter the market on a large scale again remains uncertain. The only certainty is that the crypto world's forward momentum will not stop.

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