The crypto venture model is fracturing. Jeff Dorman argues the industry’s biggest players have drifted into a dangerous middle ground: raising capital under 10-year venture lockups while spending their time trading liquid tokens on the secondary market.
This creates a structural mismatch. Funds enjoy venture-style fees for performing hedge-fund-style labor, often without the necessary risk management. Dorman notes many firms are now essentially unacknowledged hedge funds, holding massive positions in liquid assets like Solana or Ethereum while claiming they are “long-term builders.”
“VCs are holding massive positions in liquid assets like Solana or Eth while claiming they are ‘long-term builders.’ When the market turns, these funds lack the infrastructure to hedge or exit efficiently.”
- Jeff Dorman, Bankless
The result is a transparency crisis. Matt Walsh observes a fundamental shift in how Limited Partners view their crypto allocations. They are demanding real-time transparency and clear demarcations between private equity and liquid token holdings.
The friction arises from valuation. If a fund holds a token that has launched and is trading, LPs question why it’s valued at a discount or why it hasn’t been distributed. Walsh suggests ‘liquid venture’ is emerging as its own distinct asset class with its own rules, forcing a professionalization of the back office.
“The days of hiding a struggling portfolio behind a 10-year horizon are over.”
- Matt Walsh, Bankless
Funds that cannot provide audited, frequent updates on their liquid positions will find the next fundraising cycle impossible.
