ABCDE Halts New Investments as Crypto Venture Capital Funding Declines Amid Broader Market Bull Run

Executive Summary

Web3 investment fund ABCDE has announced a cessation of new investments and fundraising, a decision coinciding with a pronounced downturn in crypto venture capital funding despite an overall bullish market trend. This move reflects a broader industry reorientation towards capital efficiency and demonstrable utility within the digital asset ecosystem.

The Event in Detail

ABCDE co-founder Du Jun announced in April 2025 that the firm would halt new investments and fundraising efforts for its $400 million fund. The fund will instead concentrate on post-investment support and exit strategies for its existing portfolio projects. Jun stated that the decision was not driven by financial constraints but by fundamental concerns regarding the crypto industry's current development trajectory. ABCDE has invested over $40 million into more than 30 projects over the past three years. The fund's allocations include 28% in Bitcoin scaling technology, 16% in Ethereum liquid staking derivatives finance (LSDFi) infrastructure, and 12% in Layer 2 solutions, restaking, and smart contract platforms. Jun indicated a personal shift in focus from primary market financial investment to strategic investment and deep incubation, emphasizing industrial synergy and long-term value creation. This strategic pivot is further underscored by the launch of a new incubator brand, Vernal, set to announce its initial projects and incubation rules in May.

Market Implications

The announcement from ABCDE aligns with a broader contraction in the crypto venture capital landscape. Q2 2025 saw a significant decline in funding, with investments dropping 59% quarter-over-quarter to $1.97 billion across 378 deals. This represents one of the weakest quarters for crypto VC since late 2020. The downturn contrasts sharply with a recovering broader crypto market, where Bitcoin has seen substantial gains since January 2023. Allocators are increasingly preferring direct digital asset accumulation, particularly in Bitcoin and stablecoins, over early-stage startup investments. Institutional investors have raised approximately $15 billion year-to-date by August 21 to bolster crypto treasuries, indicating a shift towards more liquid and regulated instruments like spot ETFs and digital asset treasury companies (DATCOH) rather than venture bets. This environment presents ongoing challenges for fund managers, with new fund counts near five-year lows, despite a slight uptick in capital allocated in the first two quarters of 2025.

Expert Commentary

Industry observers note a maturing market where Venture Capitalists prioritize capital efficiency, real-world utility, scalability, and regulatory compliance over the sheer volume of deals. The investment paradigm is shifting from "liquidity-driven narrative speculation" to "cash flow and compliance-driven infrastructure building," favoring mature projects with demonstrable income. The decline of token-based fundraising is a defining feature of the 2025 crypto VC environment. VC firms are evolving their roles beyond pure finance, acting more like "investment banks" that offer operational support, regulatory guidance, and strategic partnerships. Funds are increasingly selective, seeking projects with robust technology, strong teams, clear use cases, and well-designed tokenomics that drive long-term participation. There is a strong focus on sectors such as infrastructure, real-world asset (RWA) tokenization, and Bitcoin-native strategies, while speculative categories like GameFi and NFTs have lost traction.

Broader Context

Despite a favorable macro environment in Q2 2025, including stabilized global markets and eased tariff policies, the crypto VC sector faces headwinds. The multi-year correlation between Bitcoin price and capital invested into crypto startups has struggled to recover, indicating a decoupling. The competitive landscape for institutional investment has intensified, with new entrants like spot ETFs and digital asset treasury companies siphoning capital that might otherwise flow into venture funds. Fundraising remains challenging, as traditional Limited Partners (LPs) have pulled back, and new LPs, such as Middle Eastern sovereign funds, are more selective, demanding real cash flow, compliance, and hybrid fund structures. The industry is moving towards a "compliance narrative + real returns" model, signaling a structural turning point that emphasizes sustainable growth over rapid, speculative expansion. This evolution, while potentially slowing rapid innovation, is seen by some as fostering a more robust, compliant, and infrastructure-focused crypto investment ecosystem in the long term.