From "Token Hype" to "Revenue Reality," the logic of crypto investment is undergoing a brutal shift

BlockBeats News, February 9th, Bloomberg published an article stating that the plummet in cryptocurrency prices, coupled with the emergence of market consolidation, has exposed issues in the crypto industry. It had thrived during a speculative frenzy but struggled to build sustainable, revenue-generating businesses. Now, crypto venture capital is being pushed toward a more traditional startup logic: product-market fit, profitability, and long-term user retention.

Despite facing a pro-crypto stance from the White House and a relaxed regulatory environment, the retail-driven venture capital logic that once fueled the token economy has run dry. Native crypto funds are shifting focus to areas performing better in the market, including stablecoin infrastructure and on-chain prediction markets. Some funds are also expanding into adjacent fields like fintech and artificial intelligence. However, as traditional institutions continue to enter the space, mere expertise in native crypto is no longer sufficient.

“The market is consolidating around things that are truly effective,” said Santiago Roel Santos, Founder and CEO of crypto venture equity firm Inversion. “As a category, Web3 currently lacks significant investment value. People have moved away from NFTs, gaming, and the next DeFi platform that merely exists without innovation. Even crypto-native venture capital with funds is heavily shifting toward fintech, stablecoins, and prediction markets. Everything else is struggling to get attention.”

Native crypto funds like Mechanism Capital and Tangent have started to pivot towards deep tech sectors, including investments in robotics startups like Apptronik and Figure, signaling a shift in investment focus away from the core of crypto.

Funds are stepping back from high-risk bets like NFTs, Web3 social platforms, and blockchain games that once defined the early speculative narrative. Metrics now in focus—revenue, user retention, and willingness to pay—were often overlooked in the early cycles when narrative hype, token liquidity, and market share were used as proxies to gauge project appeal.

Catrina Wang, General Partner at Portal Ventures, stated that this has led some native crypto venture funds to expand into fintech or artificial intelligence.

“If we see more funds quietly closing or downsizing next, I wouldn’t be surprised at all,” said Tom Schmidt, General Partner at venture fund Dragonfly. “They also face fierce competition from traditional VCs in the Web 2.5 space for the hottest deals.”