Tether decided to step in to save the crypto VC industry.
On September 24, brokered by the Lutnick family of U.S. Secretary of Commerce, Tether, the issuer of USDT, intends to sell about 3% of its shares at a valuation of 500 billion US dollars, raising at least 15 billion US dollars.
Prior to this, in 2025, stablecoin startups raised less than $600 million in funding. According to Rootdata data, the overall funding for the crypto industry was only $13 billion.
There are opportunities in crisis. In Q1 of 2025, Binance raised $2 billion in financing, Q2 was relatively quiet, and the DAT treasury strategy became popular in Q3. In Q4, a battle over Tether is expected.
There has been no recovery, and the difficulties faced by crypto companies in raising funds and crypto VC investment will continue.
The amount of financing in the first half of 2025 has exceeded the entire year of 2024. This does not mean that the situation in 2025 is better. 2024 was really too bad. According to The Block, in 2024, only 20 VCs accounted for 60% of all LP capital, while the remaining 488 companies divided the remaining 40%. The concentration reflects the disorder and fierceness of internal circulation.
The collapse of the asset creation system
The 2020 DeFi Summer started in 2018, and the 2025 Perp DEX War originated in 2022.
The Federal Reserve has started a cycle of interest rate cuts. In the past, this would be a positive factor for on-chain and DeFi. There would be less pressure for APR to outperform US Treasury yields, so funds would flow into high-yield products such as trading and lending.
However, in this cycle, if there is another cycle, the situation may not be as optimistic as before.
On the one hand, crypto products are deeply tied to U.S. Treasuries and the U.S. dollar. For example, the underlying returns of a number of YBS (yield-generating stablecoins) are not hedged by ETH, but rather U.S. Treasury interest + their own subsidies. On the other hand, the valuation system of on-chain assets has actually collapsed. The high FDV has defeated the pricing system of the Binance main site, and now only Binance Alpha is left struggling.
Following the valuation logic, there are only two situations in which the crypto industry is most profitable:
1. An extremely small number of participants and relatively high capital liquidity. For example, during the DeFi Summer period, there were 1,000 people on the chain and 100,000-1,000,000 CEX buyers. Asset creation is the most profitable. The wealth-creating effect of issuing coins can cover VC investment and project operations. The 1,000x return rate of the top-class $Aave warehouse was not extreme and was considered normal at the time.
2. The network effects of the absolutely large number of participants and unlimited capital liquidity, such as USDT, public chains ($BTC/$ETH) and exchanges (Binance/FTX/Hyperliquid), decrease in turn. Even if calculated based on the 1 billion users of USDT, it still cannot compare with Internet super applications.
At present, family offices, pension funds, sovereign wealth funds and Internet giants will basically no longer invest heavily in asset creation, but will be more concerned about economies of scale. This also means that the imagination of blockchain as a productivity technology has reached its peak and can only be valued as a large-scale financial technology.
Image Caption: Comparison of asset valuation and market value
Image source: @zuoyeweb3
Correspondingly, the capital market still has illusions about aerospace (SpaceX) and AI (OpenAI/Anthropic), rather than relying on transportation capacity and computing power to set prices.
Once a crypto company goes public through an IPO, its valuation will collapse to that of fintech, and the way the market verifies network effects is constantly changing.
For example, Circle's USDC issuance volume is at the level of US$70 billion, and Tether's US$170 billion is 1.7 times that, but Tether's valuation of US$500 billion is 16 times Circle's current market value of US$30 billion.
For example, Coinbase raised a total of about US$500 million in six rounds of financing before its IPO, which is far less than Binance's single financing amount of US$2 billion this year.
If we calculate the market value of BTC/ETH, we will come to a conclusion that crypto projects with super-strong scale effects do not need to go public, but this is obviously not in line with the current popular trend. DAT, ETF and IPO are already unattainable exit methods for current crypto VCs and projects.
To break it down further, the strong cycle of asset creation from 2017 to 2021 was a golden period for crypto VCs to gain both fame and fortune. However, after 2021, the situation changed rapidly, and exchanges became the main axis of industry development, especially the battle between FTX and Binance attracted everyone's attention, including the regulatory industry.
Asset creation quickly shifted to trading, and the core of all competition was the coin listing effect. The hot financing and rising effects of CeFi and the altcoin season were all spillovers of the exchange's dominant position. However, the collapse of FTX in mid-2022 changed everything. If a VC could survive until its collapse in 2024, it would be a decent exit.
Perhaps, guided trading is precisely a by-product of the FTX collapse in 2022. Hyperliquid seized its opportunity. Rejecting VC investment was just an excuse, and embracing market makers and institutions was the main axis. During the $USDH canvassing stage, No Limit Holdings/Infinite Field/CMI all "confessed" to participating in HL market making.
Before the complete outbreak of DAT in Q3 2025, Galaxy Research counted the financing situation in Q2 and revealed that companies established in 2018 accounted for the majority of the funds raised, while companies established in 2024 accounted for the largest share of transactions. That is, startups can get small funds to try, but large amounts of funds will flow to companies that have been verified by the market. In Crypto terms, this is "crossing the cycle."
Money eventually flows to the cow that has no shortage of money, and suffering eventually flows to the horse that can endure it.
However, after Scroll "ran away", the technology infra startup season basically ended. The concept stacking of ZK+ETH+L2 cannot guarantee returns, and presumably nothing can guarantee the future.
To make matters worse, the current flow does not mean that it will be okay tomorrow. For example, Perp DEX will be launched in 2025, but if you didn’t invest in it in 2022, there is no point in following up now. The war for trading is over, and this will not be the market consensus in the future.
Binance will have direct contact with all retail investors. Hyperliquid does not mind outsourcing the front end to Phantom. Liquidity is its own moat, and the network effect is constantly evolving.
At this point, we can piece together the loss of focus between industry development and VC investment. Compared with the traditional Internet industry, the crypto industry is too cyclical. A small cycle can be completed in 2-3 months, but VC investment in Infra often takes 2-3 years to be effective. This means that after at least 10 small cycles, the track invested by VC must become the mainstream of the current period, and the project invested by VC must become the mainstream of the track. The double hit is comparable to a roller coaster.
Impact on the trading system
The collapse of valuation logic will require a long time to reshape.
Maybe everyone is a VC, and maybe mergers and acquisitions are also exits.
Currency has a time cost, and VC is the provider of funds for the information gap between the primary and secondary markets. The liquidity of information will eventually be exchanged for excess profits. The classic IPO or Binance main site are both promised lands with money and coins flowing, but now either help the project IPO or directly turn left to Alpha. One thought is heaven and one thought is hell. ABCED will directly close down.
Whether it is DAT, ETF or mergers and acquisitions, the role of VC is no longer a "dream maker", but more like a capital provider. For example, this year's DAT total financing is US$20 billion (excluding Strategy), but Peter Thiel is investing in ETH in the US, Huaxing can only buy BNB in the Hong Kong stock market, and Summer Capital can only be the manager of $SOL DAT.
This is actually not normal. Transactions are concentrated in BTC/ETH, but DAT has begun to spread to small currencies. Perhaps copycat trading is a rigid demand. There are more ways to play outside the first level. The only problem is that most DAT and VC investors cannot artificially create a 1000x return rate.
Image source: @Strategy
The deeper crisis lies in the fact that financing does not necessarily require the participation of VCs, especially non-US VCs. Polymarket acquired the CFTC-registered exchange QCEX and returned to the US market. Tether launched the Genius Act-compliant stablecoin USAT and returned to the US market. ETFs and DATs also basically take place in the US stock market.
Guiding transactions is no longer a competition between better matching engines, but rather a competition of the maturity of capital operations. The so-called compliant exchanges are more like creating entry barriers for newcomers, who collect high fees behind closed doors.
In addition to financing, industry brands themselves have also begun to couple with each other, which is reflected in the 2024-2025 M&A cycle. Coinbase acquired Deribit to fill the options market, Phantom acquired the wallet tool Bitski, security product Blowfish and trading tool SolSniper, and even Stripe acquired the wallet service Privy and stablecoin tool Bridge.
Image Caption: Crypto M&A Activity
Image source: @zuoyeweb3
Whether it's Coinbase's vision of "Everything Exchange" or Hyperliquid's slogan of "House All Finance," the distinction between CEX and DEX is no longer meaningful. The focus of trading is no longer on connecting with retail investors, but on providing more mainstream or long-tail trading options and liquidity! Liquidity is always liquidity!
Therefore, Coinbase will tie up with Circle to issue USDC, and Hyperliquid will play with $USDH on its own. What they value is not the scale effect of stablecoins, but the customer acquisition and retention capabilities of stablecoins. This is the biggest difference between them and USDT.
VCs view USDT from a perspective that although investing in Tether is expensive, it is a sure win.
USDT Open Fundraising:
1. Open fundraising during low interest rates and use external funds to develop diversified businesses
2. Give Sichuan Bao related entities the opportunity to enter the market, refer to Binance to complete the financing using USD1
3. It is expected to deal with more fierce competition from stablecoins, especially the profit-sharing mechanism of YBS, which requires not only blocking Circle but also dealing with Ethena.
Directed transactions will become a common feature of capital flows in 2025, but this is not the future. DAT, margin trading, LP, stablecoins, and RWA all lack imagination. Investing in Perp DEX or stablecoins are both useless choices for working people.
VC is ultimately a manual job. It must bet on future "feelings" and "trends", disenchant with underlying technologies, network effects, and current hot spots, and seek PMF in the long term.
A thousand-fold return depends on the next "global application". What else is there besides stablecoins, exchanges and public chains?
The mining industry has reached a critical point. The future of the mining industry lies in data centers, or in changing the Bitcoin economic model. Simply put, this means charging transfer fees. Unlike transaction fees that maintain the Bitcoin network, transfer fees protect the interests of users.
All aspects of transactions have been taken over by existing giants. Challenging Coinbase, Hyperliquid, and Binance is almost impossible. It is more feasible to conduct peripheral activities around them or become part of their ecosystem.
It is worth noting that the strength of exchanges and market makers is an illusion, which is only effective in the Binance ecosystem. They also become weak in higher-dimensional capital flows. In dimensions such as ETFs, DATs, and M&A, market makers are not strong, especially in the secondary return rate of BTC/ETH. Exchanges and market makers are no smarter than others.
If enthusiasm for stablecoin financing remains, the only question is how they plan to counter USDT's first-mover advantage and network effects. This is not a difference in the amount of funds, but a change in consumer behavior.
Traditional Internet can spend money to gain market share, such as taxi-hailing, food delivery, and local life, but there is no good solution to how to enable people to switch financial assets. Given the current awkward situation, transaction-oriented innovation will not be the focus of future innovation, but we have not yet figured out any form of interaction other than transactions.
Conclusion
The crypto industry is undergoing a transformation and must transcend the Fintech valuation framework and embrace global applications to have a future. However, it has now reached a fork in the road. Will the future be characterized by more, more frequent, and more mainstream transactions, or by broader uses (blockchain, stablecoins, RWA, Web3)?
A preliminary summary of the VC industry in 2025:
1. Cycle fragmentation, mainstream trading (BTC/ETH), and investment concentration
2. Crypto companies have difficulty raising funds, crypto VCs have difficulty raising funds, and the valuation system has collapsed.
3. From investment to capital allocation, the intermediary nature is enhanced and the interaction with the secondary market is reduced.
4. Main axis decentralization, Q1 Binance, Q2 decentralization, Q3 DAT, Q4 stablecoin
The current situation is very similar to the collapse of the crypto bubble at the beginning of the century. People need to rebuild their old empire. Facebook, Google and Apple are all products of the post-bubble summer. Perhaps Arthur Hayes can be used for counter-cyclical investment?
In a nutshell, we need the Peter Thiel of the crypto era, not the a16z of the internet era.
