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

On February 9, Bloomberg published an article noting that plummeting cryptocurrency prices and growing market consolidation have laid bare flaws in the crypto industry. Once thriving amid speculative frenzy, the sector has struggled to build sustainable, revenue-generating businesses. Now, crypto venture capital (VC) is shifting toward traditional startup principles: product-market fit, profitability, and long-term user retention. Despite a pro-crypto stance from the White House and a relaxed regulatory environment, the retail-driven VC logic that once fueled the token economy has dried up. Native crypto funds are reorienting toward higher-performing areas, including stablecoin infrastructure and on-chain prediction markets. Some are also expanding into adjacent sectors like fintech and artificial intelligence (AI). But as traditional institutions continue entering the space, expertise in native crypto alone is no longer sufficient. “The market is consolidating around what actually works,” said Santiago Roel Santos, founder and CEO of crypto venture equity firm Inversion. “As a category, Web3 currently lacks meaningful investment value. People have moved on from NFTs, gaming, and the next DeFi platform that just exists without innovation. Even crypto-native VC firms with capital are heavily shifting toward fintech, stablecoins, and prediction markets. Everything else is struggling to get any attention.” Native crypto funds like Mechanism Capital and Tangent have begun pivoting to deep tech sectors—including investments in robotics startups Apptronik and Figure—signaling a move away from crypto’s core. Funds are pulling 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 earlier cycles, when narrative hype, token liquidity, and market share served as proxies for project appeal. Portal Ventures General Partner Catrina Wang noted this shift has led some native crypto VC funds to expand into fintech or AI. “I wouldn’t be surprised at all if we see more funds quietly closing or downsizing next,” said Tom Schmidt, general partner at Dragonfly. “They also face fierce competition from traditional VCs for the best deals in the Web 2.5 space.”