The Funding: VCs discuss the crypto correction and what’s next
Bitcoin and ether have erased all their gains for the year — a sharp turn for a market that watched bitcoin hit an all-time high above $126,000 just two months ago. The broader picture looks similar: all 20 GMCI crypto indices are in the red on a one-month basis, according to The Block’s data, and the Oct. 10 record liquidation event made clear how fragile the market had become. With the drawdown continuing and sentiment weakening, I set out to ask VCs two key questions: why crypto markets remain under pressure, and what comes next.
VCs pointed to two main factors behind the correction: the Oct. 10 liquidation event and a tougher macro environment. The deleveraging event — driven by low liquidity, bad risk management and weak oracle or leverage design — caused significant losses and introduced uncertainty, said Rob Hadick, general partner at Dragonfly.
Boris Revsin, general partner and managing director at Tribe Capital, echoed that view, calling the episode “a leverage washout” that cascaded through the rest of the market. At the same time, the macro picture has turned less supportive: expectations for near-term rate cuts have faded, inflation has shown signs of stickiness, job markets have softened, geopolitical risks have increased and consumers are showing stress. That mix, VCs noted, has pushed most risk assets to trade poorly over the past two months.
Anirudh Pai, partner at Robot Ventures, also highlighted rising worries about a U.S. slowdown. Key growth indicators — including the Citigroup Economic Surprise Index and 1-year inflation swap (a derivatives contract used to transfer inflation risk through an exchange of fixed cash flows) — have started to roll over, Pai said, adding that it’s a pattern that has preceded earlier recession scares and contributed to the broader risk-off tone.
"This could possibly worsen and turn into a full-blown recession; nevertheless, it could also act similarly to those previous instances and sentiment could shift, so that optimism returns to the market. It is still too early to tell," Pai said.
Another factor weighing on prices is the lack of fresh inflows. Dan Matuszewski, co-founder and principal of CMS Holdings, said that outside of tokens supported by buybacks, crypto has seen “very little incremental inflow” except in digital asset treasury, or DAT, companies. With new demand drying up and ETF flows also no longer providing major support, prices have fallen faster.
The signals that matter from here
VCs said the most important catalyst over the next few months is macro clarity — especially around interest rates and the Federal Reserve. Both Hadick and Revsin pointed to the path of rate cuts and who will lead the Fed in the next term as the biggest drivers for risk assets. Markets are pricing cuts, but Revsin said investors may still be underestimating how dovish policy could become if a new Fed chair leans toward keeping liquidity flowing. Hadick added that clearer signals on inflation, holiday spending and overall liquidity conditions would strengthen the setup for bitcoin, which “still trades like a macro asset.”
Another catalyst is simply the return of normal economic data. Pai noted that with the recent U.S. government shutdown, investors have been flying blind — “a dearth of data,” in his words — which has made trading more volatile. He pointed out that the October Job Openings and Labor Turnover Survey (JOLTS) will be the only major labor datapoint before the next Federal Open Market Committee meeting, leaving markets to move on uncertainty rather than information. In his view, the next jobs report will matter more than usual because investors “hate uncertainty” and haven’t had much to anchor to.
VCs also pointed to longer-term trends the market may be underpricing. Hadick said investors still aren’t fully accounting for how quickly economic activity is shifting onchain, noting that payments, tokenized investing and social trading could accelerate meaningfully by 2026. The scale and speed of that transition — and the demand it could unlock — remain underappreciated, he said.
The AI connection
Another underpriced catalyst is how the AI trade evolves, according to some VCs. AI has become a core driver of risk appetite across frontier tech. If the AI trade strengthens, it supports crypto. If it weakens, the pullback will almost certainly spill into digital assets through shared macro channels.
"Crypto would be impacted by second-order impacts like a weaker macro in public tech equities (to which it’s correlated) and also downstream regulatory clamp-down in Chinese / Hong Kong markets," Revsin said. "I would clarify this isn’t my base case, it’s a risk factor and I think it’s outweighed by positive macro trends in interest rates, heavy U.S. deregulation, and the associated copycat behavior in other countries, and also low valuations in some crypto that makes it an attractive buy if you factor in revenue multiples on-chain. Overall, I’m a cautious bull into 2026," he added.
Lex Sokolin, co-founder and managing partner at Generative Ventures, warned that a deeper weakness in AI infrastructure could have broader consequences. "If AI starts to melt down — especially with Oracle bonds and data center builds — that can shock equities and thereafter alternatives," Sokolin said.
Early signs of stabilization, but not a clear turn yet
VCs broadly agreed that the market has begun to steady, though not enough to call a real bottom. Bitcoin has bounced off its lows around $80,000 and ETF flows have shown small signs of improvement, which some view as evidence that forced sellers may be mostly out. But the backdrop remains choppy: markets are still reacting to each new datapoint on rates, inflation and AI earnings. As Revsin put it, this looks more like an “early stabilization phase” than the start of a clean rebound.
Across VCs, the $100,000–$110,000 bitcoin range emerged as the key zone for sentiment shift. Holding that band would suggest the market has moved from “big top” fears to “healthy reset before the next leg," according to Revsin. Until then, fear remains the dominant mood and the market is likely to stay sensitive to shocks.
VCs said the clearest signal of a sustained turn would be stability in both flows and positioning. Several pointed to a few weeks of steady net inflows into spot BTC and ETH ETFs alongside derivatives data showing open interest rebuilding without excessive leverage. "Range-bound trading in smaller and smaller bands with low volatility is a sure sign that the market is stabilized," Hadick added.
Even in this environment, some investors see improving risk-reward. Revsin noted that the sell-off has reset valuations for several revenue-generating altcoins back to 2024 levels, even as fundamentals — onchain activity, fees, user growth — have improved. Bitcoin dominance didn’t spike during the correction, he said, a sign there is still appetite for quality altcoins. "Our fund rarely holds BTC or ETH, and so we’ll focus on holding promising revenue generating positions — i.e. Grass, Re, and others," Revsin said.
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.
© 2025 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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