Dragonfly closes $650m fund amid crypto downturn

Dragonfly Capital has secured $650 million for its fourth investment vehicle, pressing ahead with fresh commitments to digital asset infrastructure even as senior partners describe the current venture climate in crypto as a “mass extinction event”. The San Francisco and Singapore-based firm said the new capital will be directed towards foundational blockchain systems, stablecoins, on-chain financial services and tokenised real-world assets, signalling a long-term strategy despite persistent market turbulence.

The fundraise comes at a delicate moment for the sector. Venture funding for crypto start-ups has fallen sharply from its 2021 peak, when low interest rates and surging token prices fuelled record inflows. Since then, a series of high-profile collapses, including the bankruptcy of FTX in late 2022 and failures among lenders and exchanges, have reshaped risk appetite. Data from industry trackers show global crypto venture investment volumes remain well below prior cycle highs, even as digital asset prices have stabilised compared with the depths of the bear market.

Dragonfly’s managing partners have argued that the contraction is eliminating weaker projects and speculative capital, leaving space for infrastructure-focused builders. In public remarks, the firm characterised the downturn as a cleansing phase rather than a terminal decline, contending that core blockchain networks and payment rails continue to evolve. The $650 million vehicle follows earlier funds raised in 2018, 2021 and 2022, when the firm amassed billions in cumulative commitments across strategies.

The latest fund is expected to target early- and growth-stage companies globally, with a particular emphasis on financial plumbing that underpins digital asset markets. Stablecoins, which are typically pegged to fiat currencies such as the US dollar, have become a critical settlement layer for trading and cross-border transfers. Issuers such as Tether and Circle have seen circulating supply recover after declines linked to banking sector stress and regulatory scrutiny. Meanwhile, tokenised real-world assets, including Treasury bills and private credit instruments represented on blockchain networks, have gained traction among asset managers seeking operational efficiencies.

Market participants say the rise of tokenised government securities and money market products reflects a broader pivot from speculative trading towards yield-generating instruments. Asset managers and fintech firms have experimented with placing short-term debt on public blockchains, citing faster settlement and improved transparency. Advocates argue that this could bridge traditional finance and decentralised networks, though regulators continue to assess custody, disclosure and systemic risks.

Dragonfly has previously backed prominent projects across decentralised finance, infrastructure protocols and consumer-facing platforms. Its portfolio has included investments in exchanges, cross-chain interoperability tools and layer-two scaling solutions designed to reduce transaction costs on networks such as Ethereum. The firm’s geographic reach, spanning Asia and North America, has allowed it to tap developer communities in Singapore, Seoul and Silicon Valley, as well as emerging markets where crypto adoption has been linked to remittance flows and currency volatility.

The broader funding environment remains selective. According to industry data providers, total venture capital invested in blockchain and crypto start-ups in 2024 and early 2025 trails far behind the 2021 frenzy, though deal counts suggest continued activity at smaller cheque sizes. Investors have become more focused on revenue models, regulatory compliance and sustainable token economics. The collapse of several high-profile projects during the previous cycle prompted limited partners to demand stricter governance and risk controls.

Regulatory developments are also reshaping the investment landscape. In the United States, enforcement actions by the Securities and Exchange Commission against exchanges and token issuers have created uncertainty around classification of digital assets. At the same time, progress on spot bitcoin exchange-traded funds has broadened institutional exposure to the asset class. In Europe, the Markets in Crypto-Assets framework is establishing a unified licensing regime, offering clearer rules for service providers. Asian financial centres including Singapore and Hong Kong have refined licensing requirements for virtual asset firms, balancing innovation with safeguards.

Against this backdrop, Dragonfly’s decision to close a substantial fund suggests confidence among its limited partners, which typically include endowments, family offices and high-net-worth investors. Venture firms raising capital in the current environment have often faced extended timelines and smaller targets compared with the exuberant fundraising rounds of three years ago. Securing $650 million indicates sustained belief among backers that blockchain infrastructure could underpin new financial rails.