The return to rationality in crypto venture capital: execution and asset growth determine investment success

Partners from Pantera Capital, Paul Veradittakit and Franklin Bi, recently discussed the evolution of the cryptocurrency investment market, painting an intriguing picture of a sector transitioning toward greater professional maturity.

An obvious paradox: billions invested but fewer transactions

The most surprising data emerges immediately: this year, total funding reached a record $34 billion, yet the number of transactions has plummeted by nearly 50% compared to 2021 and 2022. This seemingly contradictory phenomenon actually reveals a profound structural shift in the market.

The years 2021-2022 were characterized by near-zero interest rates and abundant liquidity, fueling a true speculative cycle. During that period, the market was dominated by the metaverse narrative: projects received funding not so much for their execution capabilities but for the allure of the story being told. The community invested in narratives rather than in company fundamentals.

With the disappearance of the “altcoin bull market,” the landscape has radically changed. Today, capital is focused on Bitcoin, Ethereum, and Solana, while retail small investors and family offices have drastically reduced their participation in early-stage deals. Currently, investments are mainly made by institutional crypto funds and traditional venture capital in the fintech sector, characterized by much more rigorous due diligence processes.

From speculation to selection: the crucial role of professionalism

The change is not only quantitative. The quality of investigative research now serves as the discriminating factor. Contemporary funds conduct much more thorough evaluations before deploying capital, concentrating investments on a smaller number of projects but with significantly larger amounts per deal.

This shift toward professionalism is clearly reflected in exit strategies. Until recently, the main way to realize profits was through a Token Generation Event (TGE), i.e., the issuance of tokens on the public market. Today, exits are increasingly happening via traditional stock exchange listings.

Circle’s IPO marks a milestone in this regard: it concretely demonstrated that a crypto project can go through the full journey—from seed funding, through Series A and subsequent rounds, to public market listing. This credible exit pathway has significantly reduced the risk perception that once characterized investments in the sector.

Digital Asset Treasury: from trend to quest for management quality

Digital Asset Treasuries (DAT) exemplify this transition toward rationality. Considering the historical evolution: one could buy crude oil directly or own shares of a major oil company. The equity choice prevailed because it represented a “machine” generating continuous value—extraction, refining, marketing.

In the context of digital assets, DATs play exactly this role: they do not passively hold cryptocurrencies but actively manage them to generate higher yields. The recent market cooling toward DATs does not signify disappearance but rather maturation. Investors have understood that value depends primarily on the execution capacity of the management team, not merely on ownership of the underlying asset.

This is a positive sign of market rationality. In the coming years, active management structures will continue to evolve, and we might even see blockchain project foundations transforming into true DATs, applying professional capital markets tools instead of operating as purely administrative entities.

Geographically, the boom of DATs in the United States may be nearing its end, but Asia-Pacific and Latin America still offer significant growth opportunities. However, only structures led by teams with proven ability to grow portfolios consistently will prevail.

Investment trends for the next decade

Looking at upcoming investment opportunities, two main strategic directions emerge.

Tokenization remains the dominant long-term theme. Although discussed since 2015, it is a transformation that will take decades to fully develop. The sector has just moved from the theoretical phase to the operational phase with real institutions and clients. Current implementations involve “copying and pasting” assets onto the blockchain to achieve efficiency and global access. But the true potential lies in programmability: these assets can be controlled via smart contracts, creating new financial products and risk management mechanisms previously impossible.

Zero-knowledge proof (ZK-TLS), or “proof of network,” addresses a fundamental blockchain problem: “garbage in, garbage out.” Off-chain data—bank statements, transaction histories, user behaviors from traditional apps—can now be verified and brought on-chain without exposing sensitive information. This enables behavioral data from Robinhood or Uber to interact securely with on-chain capital markets, creating entirely innovative applications.

Significantly, JPMorgan was among the first partners of Zcash and Starkware, demonstrating that the theoretical insight has existed for some time, but only now is the technological infrastructure and talent sufficient for large-scale applications.

Within the tokenization ecosystem, stablecoins represent the undisputed killer application. With increasingly defined regulation, stablecoins are realizing the true potential of “money over IP,” making global payments extremely cheap and transparent. In Latin America and Southeast Asia, they have proven to be the most effective access key for mainstream cryptocurrency adoption.

Another exploding category involves consumer applications and prediction markets. From pioneering platforms like Augur to contemporary markets like Polymarket, the sector is experiencing exponential growth. These tools democratize the creation of markets betting on any topic—corporate results, sporting events—offering both entertainment and an efficient, decentralized mechanism for information discovery. The regulatory and economic potential remains largely unexplored but could bring an unprecedented flow of information to news and trading sectors.

More generally, on-chain capital markets do not simply replicate traditional markets. In Latin America, many individuals make their first financial investment by buying Bitcoin on platforms like Bitso, completely bypassing traditional stock markets. Yet, they could immediately access complex derivatives like perpetual swaps. This “generational financial leap” might mean that these cohorts will never use Wall Street tools, perceiving them as inefficient and incomprehensible.

Critical comparisons: which path for the future?

On a three-year investment horizon, choosing between owning Robinhood (HOOD) or Coinbase (COIN) reveals different visions of the sector. Robinhood pursues full vertical integration—from clearing to trading—within a fully controlled fintech platform. Coinbase has an even broader ambition—to bring the entire finance sector fully on-chain—but it requires 10-20 years to fully realize. In the short term (three years), Robinhood might deliver more tangible results.

Regarding “dedicated payment chains” for stablecoins, the debate remains open. A blockchain optimized specifically for payment scenarios—with superior scalability and privacy—has intrinsic value. A chain launched by Stripe, although not neutral, could reach significant scale thanks to the resources of its parent company. However, in the long run, value tends to concentrate among users, not platforms trying to control them. Users prefer open, liquid environments over proprietary chains.

On privacy as an investable sector, positions diverge: it could be a feature embedded in almost all applications, making it difficult to capture value alone since technological advances tend to become open source. However, at the corporate and institutional level, privacy is a genuine necessity, and the real opportunity lies in combining technology with compliance, creating commercial solutions that become industry standards.

Often overlooked fundamentals: lock-up and governance

A frequently debated issue in crypto circles concerns lock-up periods for founders’ tokens. Some advocate terms of four years, others favor immediate liquidity. But the question rests on a false premise: that success depends on the timing of unlocks. The reality of venture capital is that 98% of projects fail. The main cause is not lock-up design but the lack of genuine value creation.

However, from a design perspective, a reasonable lock-up period (2-4 years) remains necessary: it allows the team to develop the product and reach milestones, avoiding early price crashes that sabotage long-term goals. Crucially: lock-up periods must be identical for founders and investors. If an investor seeks special clauses for early exit, it signals they never intended to stay long-term—a devastating red flag for the project.

The Layer 1 war: still far from over

Competition among public layer 1 blockchains will continue, albeit less frenetic than in the past. Few new competitive L1s will emerge, but established ones will persist thanks to their respective communities and ecosystems. The focus shifts to how L1s can effectively capture value—a question still under systematic investigation.

It is premature to declare the death of traditional L1s. Technology constantly evolves, as do value capture mechanisms. Solana is a prime example: repeatedly declared dead, it continues to prove vital for those who maintain faith in its potential. Wherever on-chain activity exists, mechanisms to capture value emerge. Fundamentally, “priority fees decide everything”: competition always generates value.