Traders are revisiting their views on crypto as dragonfly capital quietly raises contemporary cash for a brand new section of the market.
New $650 million fund in a bruised crypto market
Crypto is the missed center baby of tech proper now, squeezed between headline-grabbing AI labs and specialised AI startups. Nonetheless, regardless of a number of brilliant spots for blockchain know-how, from ongoing enthusiasm round stablecoins to faint optimism about crypto market construction laws, sentiment has sunk to an all-time low.
Costs have slumped with out an apparent villain like Gary Gensler or Sam Bankman-Fried guilty, leaving many traders disillusioned. Furthermore, retail curiosity has pale, and informal observers more and more deal with digital belongings as yesterday’s story, at the same time as infrastructure continues to advance behind the scenes.
Amid this extended winter, the blockchain enterprise agency Dragonfly Capital has managed to shut its $650 million fourth fund. Common accomplice Rob Hadick mentioned the agency sidestepped the “mass extinction occasion” that hit many friends, as quite a few devoted crypto funds struggled to boost contemporary capital or shuttered fully.
Backing class winners like Polymarket and Rain
Hadick attributes the profitable elevate primarily to well timed stakes in a set of perceived class leaders that persuaded restricted companions to recommit. These embody Polymarket, the prediction market platform, and Rain, a stablecoin-powered card issuer positioning itself on the intersection of funds and on-chain finance.
Nonetheless, beneath these headline wins lies a multi-year conviction that crypto would more and more intersect with Wall Avenue slightly than evolve into a totally realized Web3 model of the web. Whereas many VCs chased consumer-facing Web3 apps over the past cycle, Dragonfly directed extra of its consideration towards monetary plumbing and regulated-adjacent infrastructure.
That thesis is now central to how the agency presents its dragonfly capital fund to backers. The companions argue that as regulators make clear guidelines and conventional establishments develop into extra snug with digital belongings, platforms tied to buying and selling, funds, and tokenized real-world devices will seize the majority of the worth.
From China roots to a Wall Avenue-facing technique
Dragonfly launched in 2018 as a partnership between Alex Pack, then main crypto investments at Bain Capital Ventures, and Bo Feng, a well known determine from the early Chinese language web ecosystem. The agency initially straddled the U.S. and China, reflecting the place each capital and crypto innovation had been concentrated on the time.
The early years had been rocky. The separation from Pack turned one thing of lore in blockchain VC circles, highlighting the pressures of constructing a devoted digital asset franchise. Furthermore, the agency finally pulled again from China altogether following the Chinese language authorities’s sweeping crackdown on crypto, which successfully pushed many native tasks and exchanges offshore or out of enterprise.
Beneath the management of Haseeb Qureshi and Tom Schmidt, Dragonfly rebuilt its identification and fame. Over time it emerged as one of many sector’s extra outstanding traders, collaborating in a broad vary of token and fairness rounds throughout DeFi, infrastructure, and buying and selling platforms in the course of the business’s boom-and-bust cycles.
Fintech convergence reshapes the funding playbook
The arrival of Hadick from the standard finance world in 2022 marked one other turning level for the agency. Together with his background in typical markets, Dragonfly sharpened its give attention to the rising overlap between crypto rails and fintech, leaning right into a view that digital belongings would more and more plug into current monetary programs.
Schmidt describes the present interval as “the largest meta shift” he has seen throughout his time within the business. In his view, traders now acknowledge that there will likely be fewer native software tokens, which beforehand underpinned a lot of the enterprise mannequin in crypto, and extra tokens tied to real-world belongings similar to shares or non-public credit score funds.
That mentioned, this shift represents a big change for founders and traders who had constructed methods round app-specific tokens and speculative demand. As an alternative of attempting to recreate each web operate on-chain, the brand new emphasis falls on tokenizing current belongings, integrating fee flows, and constructing compliant buildings that may interface with banks and brokerages.
From insurrection to integration with international finance
There may be an unavoidable comedown on this route for blockchain know-how, which initially positioned itself as a insurrection in opposition to Wall Avenue and governmental management of world finance. Early boosters framed the motion as a strategy to substitute entrenched monetary intermediaries, to not provide them with new infrastructure.
Nonetheless, because the business matures, the narrative has shifted from overthrow to integration. Schmidt argues that even when the rebellious aura has pale and the sector seems much less glamorous, it’s essential to not ignore the size of what has been inbuilt a little bit over a decade.
He factors out that digital, internet-native cash has grown from “zero to a trillion {dollars} in 10 years,” underscoring how far the ecosystem has come since Bitcoin first emerged. Furthermore, this progress has persevered via a number of boom-and-bust cycles, regulatory battles, and know-how shifts, suggesting that the underlying development stays intact at the same time as sentiment fluctuates.
In abstract, Dragonfly’s new $650 million car, anchored by bets on platforms like Polymarket and Rain, displays a broader repositioning of crypto round regulated markets, tokenized real-world belongings, and nearer alignment with conventional finance slightly than a pure Web3 imaginative and prescient.