The "Everything Bubble" Legacy

The 2021–2022 frenzy, fueled by DeFi, NFTs, and play-to-earn mania, was amplified by COVID-era quantitative easing and zero interest rates. Dubbed the "Everything Bubble," this era flooded markets with liquidity, pushing speculative capital into crypto. VCs, flush with cash, prioritized hype over fundamentals, betting heavily on inflated valuations.

Token Vesting Mechanisms: A Double Bind

Modeled after traditional equity vesting, token lockups aim to stabilize ecosystems by preventing early sell-offs. Common structures like "1-year cliffs + 3-year linear releases" or even 5–10 year lockups align incentives between teams and investors. While sensible for a maturing industry, these mechanisms backfired when the Fed’s 2022 rate hikes popped the crypto bubble.

As valuations collapsed, crypto VCs faced a reckoning. STIX founder Taran Sabharwal reported 85%–88% valuation drops for projects like SCR and BLAST. Many VCs missed exit windows, forcing them to hedge via derivatives and short positions, as Bloomberg exposed.

Fundraising in a Drought

New crypto funds struggle to raise capital. Galaxy Digital reports 2024 as the weakest year since 2020, with 79 new funds securing $5.1 billion—far below 2021–2022 levels. PANews data adds context: 107 Web3-focused funds launched in H1 2022 alone, raising $39.9 billion.

Meme Coins and Bitcoin ETFs: Diverting Capital

With few compelling narratives, memecoins dominate liquidity. Projects like Solana-based WIF, backed by Stratos (a Marc Andreessen-linked fund), delivered 137% returns in Q1 2024, luring speculators and hedge funds alike.

Meanwhile, Bitcoin ETFs have reshaped capital flows. Since their January 2024 launch, these ETFs absorbed $2 billion in three days, cementing Bitcoin’s "digital gold" status. Yet they siphoned capital from altcoins and early-stage VCs, disrupting historical market cycles. Bitcoin’s dominance hit 64.61% by April 22, its highest since 2021, squeezing Web3 startups and prolonging VC exit timelines.

A Prolonged "Dark Night" for Crypto VCs

High rates, regulatory uncertainty, and LP risk aversion compound the crisis. As Hashkey Capital’s Rui noted on X: "Will we see a 2020-style rebound? Many are pessimistic. Users are entrenched in casino-like trading, while innovation in Social, Gaming, and ID has stalled. New infra opportunities feel nonexistent."

For crypto VCs, the storm shows no sign of passing. Survival hinges on adapting to a market where Bitcoin reigns, memes distract, and true innovation remains elusive. The "vintage" curse may linger, but as history shows—after darkness comes dawn.

The "Everything Bubble" Legacy

The 2021–2022 frenzy, fueled by DeFi, NFTs, and play-to-earn mania, was amplified by COVID-era quantitative easing and zero interest rates. Dubbed the "Everything Bubble," this era flooded markets with liquidity, pushing speculative capital into crypto. VCs, flush with cash, prioritized hype over fundamentals, betting heavily on inflated valuations.

Token Vesting Mechanisms: A Double Bind

Modeled after traditional equity vesting, token lockups aim to stabilize ecosystems by preventing early sell-offs. Common structures like "1-year cliffs + 3-year linear releases" or even 5–10 year lockups align incentives between teams and investors. While sensible for a maturing industry, these mechanisms backfired when the Fed’s 2022 rate hikes popped the crypto bubble.

As valuations collapsed, crypto VCs faced a reckoning. STIX founder Taran Sabharwal reported 85%–88% valuation drops for projects like SCR and BLAST. Many VCs missed exit windows, forcing them to hedge via derivatives and short positions, as Bloomberg exposed.

Fundraising in a Drought

New crypto funds struggle to raise capital. Galaxy Digital reports 2024 as the weakest year since 2020, with 79 new funds securing $5.1 billion—far below 2021–2022 levels. PANews data adds context: 107 Web3-focused funds launched in H1 2022 alone, raising $39.9 billion.

Meme Coins and Bitcoin ETFs: Diverting Capital

With few compelling narratives, memecoins dominate liquidity. Projects like Solana-based WIF, backed by Stratos (a Marc Andreessen-linked fund), delivered 137% returns in Q1 2024, luring speculators and hedge funds alike.

Meanwhile, Bitcoin ETFs have reshaped capital flows. Since their January 2024 launch, these ETFs absorbed $2 billion in three days, cementing Bitcoin’s "digital gold" status. Yet they siphoned capital from altcoins and early-stage VCs, disrupting historical market cycles. Bitcoin’s dominance hit 64.61% by April 22, its highest since 2021, squeezing Web3 startups and prolonging VC exit timelines.

A Prolonged "Dark Night" for Crypto VCs

High rates, regulatory uncertainty, and LP risk aversion compound the crisis. As Hashkey Capital’s Rui noted on X: "Will we see a 2020-style rebound? Many are pessimistic. Users are entrenched in casino-like trading, while innovation in Social, Gaming, and ID has stalled. New infra opportunities feel nonexistent."

For crypto VCs, the storm shows no sign of passing. Survival hinges on adapting to a market where Bitcoin reigns, memes distract, and true innovation remains elusive. The "vintage" curse may linger, but as history shows—after darkness comes dawn.