Layer One: Blockchain Capital’s contrarian bet on crypto’s next decade

Welcome to Layer One: the newsletter and podcast on the intersection of crypto and the real world. Hosted by The Block's Kelvin Sparks and John Wu, President of Ava Labs, Layer One brings you inside the institutional conversations driving blockchain forward.

This week on the podcast, we were joined by Spencer Bogart, General Partner at Blockchain Capital, to discuss novel blockchain financial products, the shifting patterns of onchain value, and how to succeed as an early-stage crypto investor.

In this week's newsletter, we're taking a look at how the VC landscape has undergone a massive shift in recent years, and what comes next for crypto fundraising.

As crypto VC deal counts hit multi-year lows, Blockchain Capital is preparing to allocate $700 million

Earlier this month, The Block reported that the number of monthly new VC deals has slumped to a five-year low — just the latest signal of a major shift in the crypto fundraising space. A total of 47 deals were concluded in May, down from a peak of 342 roughly two years prior. This multi-year downtrend is also reflected in the total dollar value of investments, dropping from a high of over $5 billion in January 2022 to just a fifth of that last month.

The amount of early-stage funding available to blockchain startups — particularly small- and medium-sized firms — has contracted significantly. Venture capital firms are increasingly targeting later-stage investment rounds, as well as opportunities in other speculative sectors. Some are even reportedly having trouble raising capital for new funds at all, leading certain commentators to declare the death of the crypto VC space.

From Bogart's perspective, this pessimism is overblown. Rather than the end of the line for crypto venture capital, its current state may instead represent a maturation: an end to the days of indiscriminate quick-flip investments, meaning crypto VCs must evolve into more sophisticated, thesis-led allocators to survive.

In other words, major crypto-native VCs are still actively allocating — they're now just much more selective than ever before.

One way of mapping this change is to look at the market categories still receiving VC attention. In the crypto fundraising peak of early 2022, NFT and gaming projects together accounted for over a third of deals, averaging near 100 per month. Interest in this niche has since collapsed, averaging just 2 deals per month over the first half of 2026 (~4% of the average monthly total).

On the other hand, the crypto financial services category — which averaged around 10% of the total deal count in the first months of 2022 — has seen 14 deals per month this year (around 28% of the total). DeFi likewise remains a proportionally strong fundraising category, accounting for just over a quarter of all deals concluded in 2026 thus far.

Just as the wider crypto markets are maturing with the arrival of institutional capital, so too is the fundraising space in a transition phase. Highly speculative, retail-driven bets have fallen by the wayside in favor of revenue-generating businesses and institutional infrastructure.

Last month, Bitwise CIO Matt Hougan noted in a memo to investors that three of the biggest fundraising rounds of the past year — Tempo ($500 million), Canton ($355 million), and Arc ($222 million) — were for institutional blockchains focused on stablecoins and RWA tokenization. He cites the passage of the GENIUS Act as a key driver of these deals and suggests the Clarity Act may act as a similar catalyst if passed this year.

Yet at the same time, Bogart warned that the booming AI and robotics sectors are drawing the gaze of VCs away from the blockchain space. He stressed the need for crypto VCs to stay the course and keep seeking out pre-consensus opportunities, rather than throwing capital at the sort of big-ticket AI deals that reportedly ate up over 60% of global VC allocations last year.

That's how Blockchain Capital became an early investor in some of the defining trends and companies of recent years: it backed both Tether (issuer of USDT) and Circle (issuer of USDC) before stablecoins became a trending topic, as well as leading Polymarket's $55 million Series B fundraise just months before the 2024 U.S. presidential election. The prediction market platform is now reportedly planning a fresh raise at a valuation in the region of $15 billion (over a 40x from Blockchain Capital's entry).

Now Bogart's firm is in the midst of a fresh $700 million raise for two brand new funds, expected to conclude in the latter half of 2026. When pressed on the specific sectors they'll target this time, Bogart told us he prefers to refrain from over-defining his thesis in advance; discovering nascent opportunities means you're looking for things that simply may not exist yet.

Podcast Recap: Blockchain Capital’s contrarian bet on crypto’s next decade

In the Headlines: The stories driving the conversation this week

• DeFi lending protocol Morpho has raised $175 million at a $2 billion valuation. The funding round drew together a broad coalition of investment firms from across traditional finance and crypto, including VanEck, Paradigm, Ribbit Capital, and a16z. A spokesperson for the company said it plans to use the funds to develop its credit infrastructure and deepen its partnerships with its lineup of enterprise users, which includes the likes of Kraken and Coinbase.
• Variant has raised $222 million for a new crypto startup fund. The New York-based crypto VC — which previously invested in Uniswap, Ethereum, and Phantom — plans to target businesses "at the earliest possible stage." Its stated investment thesis centers around supporting companies that promote greater autonomy and accessibility for investors and tech users.
• The company behind Canton Network has raised $355 million in a funding round led by a16z. Blockchain development firm Digital Asset launched the Canton Layer 1 in 2024 as a hub for institutional onchain finance, drawing in network participants including JPMorgan and Visa. This latest capital injection comes roughly one month after Andreessen Horowitz's crypto division announced it had raised $2.2 billion for a fifth crypto fund, to support blockchain infrastructure builders "across all stages."

Top of the Charts: Four major crypto VCs have completed 100+ deals over the past two years

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