From Wild Fundraising to Unwarranted Hype, What Is Happening to Crypto VCs?
Original Article Title: "Crypto VC in the Midst of Liquidity Anxiety: An Unfolding Imbalance"
Original Source: ChandlerZ, Foresight News
Waterdrop Capital partner Dashan admitted in a recent Space session that all four projects he had recently invested in had launched on Binance, but none had distributed tokens to investors according to the original investment agreement. Despite the token distribution terms being clearly outlined in the contract, after the project goes live, the agreement can be amended at will, and investors are almost unable to take any effective countermeasures.
He mentioned that the amendment to the agreement was not actually the project team's intention, but rather a longstanding unwritten rule of Binance, so he does not blame the project teams because they are also at a disadvantage in front of Binance. The current strategy is very clear: to persuade and help truly high-quality project teams to forgo token distribution and go directly to listing on a relatively clean and regulated market to showcase their value.
In traditional VC investments, rights protection based on contracts does not have the same practical binding force in the encrypted token investment structure. Due to exchanges leading circulation rules after token listing, on-chain asset allocation is not immediately bound by the traditional legal system, and investment agreements often lose their enforceability at critical junctures. In the current market environment, whether a project can gain access to a top exchange directly affects its overall survival, and the importance of agreement terms is marginalized in the face of actual interests. In order to get listed, project teams have to cooperate with exchanges in redesigning aspects such as release schedule, lock-up rules, token distribution ratios, etc. Investors, lacking on-chain governance rights and circulation discourse power, find themselves in a de facto rights disadvantage.
This statement reveals a deep-rooted crisis that the current crypto VC investment system is facing, namely a dilemma where the effectiveness of contracts, liquidity control, and exit mechanisms have completely failed.
Imbalance of Power: The New Relationship Among VCs, Projects, and Exchanges
In the industry's development over the past few years, the model of "project narrative construction - multi-round VC financing - top exchange token generation event (TGE)/listing" has gradually become mainstream. The hallmark of this model is that in the early stages, projects rely on professional VC institutions for funding, resource connection, and reputation endorsement, completing financing with gradually increasing valuations, with the ultimate goal usually being the initial token issuance and circulation on a large centralized exchange for early investors to exit.
In the previous multiple bull markets, crypto VCs, as core resources, held significant power in early-stage financing and token issuance design, playing a key role in driving rapid industry expansion and project incubation. In the last bull market, the position of project teams was enhanced, but VCs still had some dominance due to their large capital and liquidity empowerment such as Launchpad.
However, as the market enters a new adjustment period, liquidity in the altcoin space dries up, and the incentive structure between investors and projects shifts. Exchange power has reached unprecedented levels, becoming the absolute controller of liquidity, with key processes such as listing approval, token allocation, and circulation strategy concentrated in the hands of exchanges. This places projects in an extremely weak position during negotiations, even if they have signed detailed investment agreements. Faced with exchange-proposed changes to circulation conditions, project teams find it difficult to refuse, ultimately having to violate the original agreements with investors.
Exchanges have become the controllers of scarce resources, while VCs are gradually being marginalized, with their actual control capacity significantly reduced.
The "Prisoner's Dilemma" in Liquidity Contraction
The current dilemma faced by "VC coins" is not caused by a single factor.
After multiple rounds of funding, projects often have a high public market valuation at the time of Token Generation Event (TGE). This directly results in a high initial buy-in cost for secondary market investors, while also implying that early investors including VCs, the team, early supporters, etc., hold a large amount of low-cost chips and have a strong potential sell-off motive.
This expectation gap puts tokens under natural selling pressure after listing, with market participants potentially forming a consensus that "selling is the optimal strategy," triggering a negative feedback loop.
Furthermore, the token economy itself exacerbates the dilemma of VC coins.
During a bull market, many projects' token issuance models follow the high growth assumptions of the bull market, such as continuous market cap growth and sufficient liquidity to support gradual unlocking. However, in practice, many projects lack real revenue support, with DeFi relying on Ponzi schemes, GameFi relying on subsidies, NFTs relying on FOMO, and tokens completely losing intrinsic growth momentum.
Most importantly, tokens invested by VCs in the past could eventually be sold to new retail investors on the secondary market, forming a complete exit path. However, there are currently very few new retail investors on-chain and on exchanges, incremental funding is drying up, and VC mutual selling has become the norm.
Essentially, early investors, project teams, liquidity providers, and early users have become part of a zero-sum game within a closed loop, making it increasingly difficult to exit.

VC Return in the Previous Bull Market Cycle

VC Return in the Current Cycle
For VC firms, the traditional strategy of relying on rapid TGEs to achieve high multiple exits is facing challenges, and the realization period of investment returns may lengthen, increasing uncertainty. This may prompt VCs to focus more on a project's long-term fundamentals, sustainable business models, reasonable valuations, and healthier tokenomic models when making investment decisions. Their role may also need to evolve from focusing on early-stage investment and driving listings to more in-depth post-investment management, strategic empowerment, and ecosystem development.
For project teams, there is a need to reassess their token issuance strategy and community relationships. Following the questioning of the "pump and dump" model, exploring a lower valuation starting point, a more equitable distribution mechanism, designing tokenomics that better incentivize long-term holders, as well as increasing operational transparency and strengthening accountability may be more worth exploring.
From a more macro perspective of industry development, the current challenges can be seen as an adjustment in the market's path to maturity. It has exposed issues accumulated during past rapid growth and may drive the formation of a more balanced, sustainable financing, and development ecosystem. This requires all market participants, including VCs, project teams, exchanges, investors, and even regulatory bodies, to collectively adapt to change, seeking to establish a new equilibrium between innovation incentives and risk control, efficiency, and fairness.
Original Article Link
You may also like
Left hand to right hand? Unpacking the financial leverage loop behind the AI boom and Wall Street’s ultimate high-stakes bet
For a company that built its brand around “safety,” its greatest historical risk exposure has come from security itself.

Untitled
I’m sorry, but without access to the original article content, I’m unable to proceed with generating a rewritten…

(Please provide the original article for rewriting.)
Key Takeaways: – WEEX Crypto News, 2026-01-30 13:45:26 The rest of the article will follow based on the…

Error Occurred While Extracting Content: Resolving Usage Limits in Data Plans
Unexpected errors related to data extraction often stem from reaching the usage limits of a given plan. Upgrading…

Navigating the Complexities of Cryptocurrency Trading
Cryptocurrency trading has surged, attracting diverse investors. Understanding market strategies and trends is crucial for success. Risk management…

HYPE Price Target Achieves $50 as Hyperliquid Reduces Team Token Unlock by 90% — Assessing The Rally’s Longevity
Key Takeaways Hyperliquid significantly cut its monthly token unlocks by 90%, sparking renewed interest in its HYPE token’s…

Hong Kong-Based OSL Group Launches $200M Equity Raise for Stablecoin and Payments Expansion
Key Takeaways OSL Group, a prominent digital asset platform in Asia, has initiated a significant $200 million equity…

Gold Price Prediction: Current Trends and Future Outlook for January 28, 2026
Key Takeaways Gold and silver prices play a significant role in the global economy, reflecting both market trends…

GameStop 2.0? Why Robinhood’s CEO Advocates Tokenization for Trading Halts
Key Takeaways Tokenized stocks are seen as a solution to counteract the disruptions seen in traditional equity markets…

Central Bank of the UAE Endorses First USD-Backed Stablecoin
Key Takeaways The UAE Central Bank has endorsed the first US dollar-backed stablecoin, USDU, to streamline compliant settlements…

Can the Gold Price Rise to $6,000?
Key Takeaways Gold prices in 2026 have experienced dramatic surges, reaching unprecedented levels in just the first month…

Solana Loses Major Portion of Validators as Smaller Nodes Exit: Concerns Over Centralization
Key Takeaways: Solana has experienced a significant drop in active validators from a high of 2,560 in March…

Gold Price Prediction as Tom Lee Says Metals Rally Could Hit Crypto
Key Takeaways: Gold recently reached an all-time high of $5,598, reflecting a strong investor shift towards safe-haven assets…

Bitcoin’s Historical Bottom Indicator Points to $62K – Could BTC Fall That Low?
Key Takeaways Bitcoin is nearing a critical support level of \$62,000, with key indicators suggesting potential further declines.…

Talos Raises $45M Series B Extension Backed by Robinhood, Bringing Total Funding to $150M
Key Takeaways: Talos, a leading provider of institutional digital asset trading technology, has raised $45 million in a…

What is the Next Milestone for Gold Prices and Will It Reach $6,000 by Year End?
Key Takeaways: Gold prices recently crossed the $5,000 per ounce mark, spurring predictions of further increases amidst global…

Bitcoin Price Prediction: Binance Inflows Just Hit a 4-Year Low – Violent Move Above $100K is Next
Key Takeaways: Bitcoin inflows into Binance have dropped to their lowest in four years, potentially signaling a tight…

Gold to $10,000 and Silver to $150: My Wild, Or Perhaps Not-So-Wild 2026 Price Predictions
Key Takeaways Geopolitical uncertainties are significantly driving up the demand for gold and silver, suggesting the prices may…
Left hand to right hand? Unpacking the financial leverage loop behind the AI boom and Wall Street’s ultimate high-stakes bet
For a company that built its brand around “safety,” its greatest historical risk exposure has come from security itself.
Untitled
I’m sorry, but without access to the original article content, I’m unable to proceed with generating a rewritten…
(Please provide the original article for rewriting.)
Key Takeaways: – WEEX Crypto News, 2026-01-30 13:45:26 The rest of the article will follow based on the…
Error Occurred While Extracting Content: Resolving Usage Limits in Data Plans
Unexpected errors related to data extraction often stem from reaching the usage limits of a given plan. Upgrading…
Navigating the Complexities of Cryptocurrency Trading
Cryptocurrency trading has surged, attracting diverse investors. Understanding market strategies and trends is crucial for success. Risk management…
HYPE Price Target Achieves $50 as Hyperliquid Reduces Team Token Unlock by 90% — Assessing The Rally’s Longevity
Key Takeaways Hyperliquid significantly cut its monthly token unlocks by 90%, sparking renewed interest in its HYPE token’s…