Crypto VC funding surging again sounds like a rally, until you trace where the money actually lands
Dragonfly Capital closed its fourth fund at $650 million this week, the identical dimension as its 2022 automobile, raised into a enterprise market Fortune calls a “mass extinction occasion.”
The headline reads like a vote of confidence: institutional capital returning, crypto winter thawing, alt season loading. But peel again one layer and the image warps.
Dragonfly’s companions describe a pivot towards fintech rails and tokenized real-world belongings, with the expectation of fewer “native app tokens.”
This is not a blanket “alts to the moon” sign. It’s a guess that worth accrues to companies that do not want tokens in any respect, or to tokens that commerce like asset wrappers quite than reflexive beta performs.
The contrarian learn: VC money flooding again can reproduce the precise playbook that broke in 2025.
More non-public capital, deployed into the identical low-float launch constructions that educated markets to front-run unlock calendars, creates extra scheduled promote partitions as a substitute of spot-buying firepower.
Manufactured shortage, scheduled dilution
The dominant token launch design of the final cycle labored like engineered hype.
Teams launched with tiny circulating provide, typically single-digit percentages of complete issuance, pushing costs skyward at Token Generation Events whereas locking most allocation behind multi-year vesting schedules.
Binance Research tracked 2024 launches and located a median market-cap-to-fully diluted valuation ratio of 12.3%, indicating that patrons bought into constructions during which 87.7% of the supply was locked.
The math was difficult: to maintain costs secure throughout that provide movement, the report estimated the cohort would wish roughly $80 billion of incremental demand-side liquidity.
Without it, each unlock turned a identified dilution occasion.
Keyrock analyzed more than 16,000 token unlock events and documented a recurring sample. Drawdowns construct throughout the 30 days earlier than the unlock, speed up into the remaining week, then stabilize roughly 14 days after.
Animoca Brands Research quantified the impact: for unlocks exceeding 1% of the circulating provide, costs decline by a median of 0.3% in the week earlier than and by one other 0.3% in the week after.
The unlock calendar turns into a everlasting brief thesis baked into the token’s ahead curve.
Memento Research’s 2025 launch tracker makes the verdict empirical: of 118 tokens that went dwell final 12 months, 84.7% now trade below their TGE valuation, with a median drawdown of 71.1% on a totally diluted foundation and 66.8% on a market cap foundation.
High FDV launches underperformed the equal-weight basket. The larger the hype, the steeper the fall.
Why “crypto VC funding is again” doesn’t suggest spot shopping for
Dragonfly’s $650 million would not translate into $650 million in market purchases that might elevate token costs as we speak.
Venture funding flows into non-public allocations: fairness stakes, Simple Agreements for Future Tokens at discounted charges, and early-stage rounds that give insiders provide earlier than public listings.
The value assist arrives later, typically structured as the unlock mechanism itself.
Binance Research explicitly connects the rise of low-float, high-FDV constructions to inflows of personal capital and aggressive pre-launch valuations.
The identical enter of extra VC money can reproduce the identical output: extra dilution overhang, extra front-runnable unlock calendars. Dragonfly’s personal thesis reinforces this.
Fortune quotes accomplice Tom Schmidt describing crypto’s “monetary period,” where native protocol tokens give solution to tokenized shares and fintech rails. That’s bullish for sure companies, nevertheless it implies a world where upside accrues to fairness or regulated merchandise, to not freely floating alts.
Take this week’s instance. On Feb. 20, LayerZero unlocks roughly $46 million in ZRO tokens, representing 5.98% of the circulating provide and concentrated in insider allocations.
Tokenomist flags it as a near-term overhang in skinny liquidity. This is what “bullish VC” seems like in follow: a public unlock calendar that gives subtle individuals with a identified exit window and retail holders with a predictable drawdown.
The scale drawback
Tokenomist’s 2025 overview tallies $97.43 billion of tokens launched throughout the 12 months, break up into $18.77 billion from insider unlocks and $78.66 billion from non-insider allocations.
For the week of Feb. 16-22 alone, scheduled releases exceed $700 million. This is not background noise, however a structural sell-side movement that dwarfs natural demand in all however the most liquid belongings.
Keyrock’s knowledge confirms recipient kind issues, with crew and investor unlocks proving more damaging than ecosystem allocations, seemingly as a result of insiders face fewer coordination prices and clearer revenue incentives.
Binance Research warns that with out matching buy-side demand, the path ahead requires tens of billions in new capital simply to tread water.
Dragonfly’s $650 million, even when totally deployed into token offers, represents a fraction of the liquidity wanted to soak up the unlock schedule of initiatives already dwell.
What good tokenomics actually seems like
The response to failed low-float launches is not to eradicate tokens, however to revamp the incentive construction in order that unlocks do not operate as ticking time bombs.
Backpack launched with 25% preliminary float, solely community-facing, and structured the remaining provide round growth-triggered unlocks tied to person progress and protocol milestones.
Instead of time-based cliffs, provide launch connects to key efficiency indicators. The market can value optimism or pessimism in actual time, quite than pricing a deterministic provide schedule.
Jupiter allotted 50% of protocol income to token buybacks, creating a verifiable sink tied to precise money flows. The crew has mentioned focusing on internet zero emissions in 2026 by restructuring distributions.
Revenue-linked buybacks convert protocol success into deflationary stress quite than purely dilutive issuance.
USDai’s $CHIP sale allotted 7% of provide to the public sale, unlocked 100% at TGE, and printed specific mechanics and dates.
The strategy trades early value stability for radical transparency. There’s no hidden insider schedule, no shock vesting tranches. The token launched unstable, however with out the structured sell-wall that depresses costs months later.
Dragonfly’s pivot towards fintech rails affords one other blueprint: some merchandise do not want tokens. If the enterprise mannequin is regulated as a monetary service, forcing a token onto it creates a dilution instrument quite than a helpful asset.
| Model / Example | Initial float | Unlock design | Buy-side sink / assist | Why it reduces overhang |
|---|---|---|---|---|
| Low-float / heavy VC unlocks (failed mannequin) | Often low / single-digit to teenagers % | Time-based vesting with cliffs; giant insider tranches | None (depends on new patrons / narrative) | Creates manufactured shortage at TGE, then a identified promote wall as unlocks arrive; market front-runs dilution |
| Backpack | 25% (community-facing) | KPI / growth-triggered unlocks tied to milestones | Implicit: milestones align provide with adoption | Markets value efficiency (milestones) as a substitute of a deterministic calendar; reduces “scheduled dump” dynamic |
| Jupiter | n/a (token already dwell) | Emissions restructuring mentioned; objective of net-zero emissions in 2026 (proposal/dialogue) | Revenue-linked buybacks (50% of protocol income) | Converts protocol success into verifiable demand-side assist; buybacks act as a sink that may offset issuance |
| USDai ($CHIP) | 7% public sale allocation; 100% of sale unlocked at TGE | Transparent mechanics/dates; avoids hidden cliffs on the market tranche | Transparency / broad distribution at sale | No shock cliff for the public tranche; reduces “retail as exit liquidity” really feel and removes calendar shock from that portion |
| Fintech rails / no token | n/a | No token issuance/unlocks | Equity / income seize (conventional) | Eliminates token dilution solely; avoids creating a dilution instrument where the product doesn’t want one |
The guidelines
Before shopping for a token, buyers ought to test 4 metrics: market cap to completely diluted valuation, proportion of provide held by insiders, the dimension of the subsequent three scheduled unlocks as a proportion of circulating provide, and the dates these unlocks land.
If the MC/FDV is under 20%, if insiders management greater than half of complete issuance, and if the subsequent unlock exceeds 5% of float, they’re shopping for into a construction designed to extract worth.
If an investor would not purchase a inventory with a identified 20% share issuance scheduled for subsequent month, then that token is a move, too.
The mechanics are similar. The return of enterprise funding would not change this, and might even amplify it.
Dragonfly’s $650 million indicators that institutional LPs nonetheless again choose crypto managers, whilst the broader enterprise ecosystem contracts.
However, whether or not that capital flows into token-heavy offers or into fintech rails, whether or not it reproduces low-float constructions or funds companies that do not want tokens in any respect, determines whether or not “VC is again” interprets to upside for liquid belongings.
The market discovered to cost dilution. The query is whether or not the subsequent wave of initiatives discovered the identical lesson.
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