The reshaping of investment logic under "Coordination Number Imbalance"—New rules for project survival in 2026

2026 has just begun, and the entire crypto industry is facing an unprecedented reshuffle. The fundamental reason for this reshuffle is not due to changes in technology or narratives, but because of a dramatic shift in the “coordination number” of institutional funds. The era of “scattering investments and broad bets” has completely ended, replaced by a cold and precise capital allocation logic.

Institutional Funds’ “Coordination Number” Is Extremely Concentrated: Why VC Investment Logic Has Changed Drastically

Wintermute Ventures released a set of shocking industry data in 2025. This top-tier market maker and investment firm reviewed about 600 projects throughout the year, ultimately approving only 23 deals—an approval rate of just 4%. Even more brutal is that only 20% of these projects entered due diligence. Founder Evgeny Gaevoy openly states: they have completely bid farewell to the crazy “spray and pray” era of 2021-2022.

This is not an isolated phenomenon. The entire crypto VC ecosystem saw a 60% drop in deal volume in 2025, from over 2,900 deals in 2024 to about 1,200. The “coordination number” of institutional funds has undergone a fundamental change—despite the total global crypto VC investment still reaching $4.975 billion, these funds are increasingly concentrated in a few top projects. The proportion of late-stage investments reached a historic high of 56%, while early seed rounds were compressed to a freezing point.

Data from the US market further illustrates the issue. Although the number of deals decreased by 33%, the median investment amount grew by 1.5 times, reaching $5 million. What does this mean? VC has abandoned the fantasy of “investing in 100 projects to get one 100x return,” and shifted to a selective mode of “placing heavy bets on only a few super projects.”

The root cause of this shift lies in a highly unbalanced “coordination number” of market liquidity. The 2025 crypto market exhibits extreme “narrowness”: institutional funds account for up to 75%, but these funds are mainly locked in large-cap assets like BTC and ETH. OTC trading data shows a paradoxical phenomenon—although BTC and ETH’s market share dropped from 54% to 49%, the overall share of blue-chip assets actually grew by 8%.

Even more critically, the narrative cycle of competing coins has completely collapsed. From 61 days of decline in 2024 to 19-20 days in 2025, capital has no time to spill over into small and medium projects. Retail investors are no longer frantically chasing cryptocurrencies as before; their focus has shifted to AI and tech stocks, leading to a severe lack of incremental capital inflow into the crypto market. The once stable “four-year bull cycle” has disintegrated, and the market has entered a new, unpredictable competitive landscape.

Wintermute’s report clearly states: the recovery in 2026 will not come naturally as before. It requires at least one strong catalyst—either ETF expansion to assets like SOL or XRP, or BTC breaking through $100,000 again to trigger FOMO, or a completely new narrative reigniting retail enthusiasm. In this environment of highly concentrated “coordination number” of funds, VC can no longer gamble on projects that only talk stories without substantial performance.

What do they need? Projects that can prove self-sustainability and have access to institutional liquidity from seed rounds onward. This is the core reason why investment logic has shifted from “invest in 100 projects for 1 100x” to “only invest in 4 projects that can survive to listing.” In this era of extremely precise capital allocation, risk aversion is no longer about conservatism but a survival necessity.

Even top funds like a16z and Paradigm are beginning to reduce early-stage investments, shifting toward mid and late rounds. Meanwhile, projects that raised high-profile funding in 2025—Fuel Network’s valuation dropping from $1 billion to $11 million, Berachain plummeting 93% from its peak, Camp Network losing 96% of its market cap—are warning the market with brutal facts: the narrative era has ended, and execution and real performance are king.

The “Coordination” Test of Seed Rounds: Self-Sustainability Becomes the Line of Life and Death

Under this extreme pursuit of precision, startups face a challenge that has shifted from “how to raise more money” to “how to prove they can survive.” Seed rounds are no longer just the starting point of burning cash; they are the critical line of life and death to demonstrate self-sustainability.

Self-sustainability first manifests as a hard validation of product-market fit (PMF). VC firms have given up on the illusion of beautiful business plans or grand visions; they want real, verifiable data: at least 1,000 active users, or monthly revenue exceeding $100,000. More importantly, user retention—if DAU/MAU ratio is below 50%, it indicates users are not buying in, regardless of how fancy the white paper or how cool the tech architecture. Among the 580 projects rejected by Wintermute, many failed at this hurdle.

Capital efficiency is the second critical threshold. VC predicts that in 2026, many “profitless zombies” will emerge—companies with ARR of only $2 million and annual growth of 50% will struggle to attract Series B funding. This means seed teams must achieve a “pre-set survival” state: monthly burn rate not exceeding revenue by more than 30%, or even achieving profitability early on. It sounds harsh, but in a market with depleted liquidity, this is the only way to survive.

Team composition must be lean—within 10 people, prioritizing open-source tools to reduce costs, or supplementing cash flow through side businesses like consulting. Projects with dozens of team members and rapid cash burn will find it nearly impossible to secure the next round of funding in 2026.

Technical requirements are also rapidly escalating. Data from 2025 shows that for every dollar invested by VC, 40 cents flow into AI-powered crypto projects—double the proportion of 2024. AI is no longer a luxury but a necessity. Seed projects need to demonstrate how AI helps shorten development cycles from 6 months to 2 months, or how AI-driven agents facilitate capital transactions or optimize DeFi liquidity management.

Simultaneously, compliance and privacy protection must be embedded at the code level. With the rise of RWA (Real World Asset) tokenization, projects need to use zero-knowledge proofs to ensure security and reduce trust costs. Those ignoring these requirements will be seen as “lagging behind a new era.”

The most critical requirement is the “coordination” of liquidity and ecosystem compatibility. Crypto projects must plan their listing pathways from seed rounds, clearly connecting to institutional liquidity channels like ETFs or DEX aggregators. Data shows that in 2025, institutional funds accounted for 75%, stablecoin market surged from $206 billion to over $300 billion, and projects driven solely by narratives face exponentially increasing fundraising difficulty. Projects need to focus on ETF-compatible assets, establish early cooperation with exchanges, and build liquidity pools. Teams thinking “raise money first, then list later” will struggle to survive beyond 2026.

All these requirements together mean that seed rounds are no longer just testing waters but a comprehensive exam. Teams must be cross-disciplinary—engineers, AI experts, financial specialists, compliance advisors—indispensable. They need to develop rapidly with agile methods, speak with data rather than stories, and pursue sustainable business models rather than just fundraising for survival.

The data mercilessly reveals the truth: 45% of VC-backed crypto projects have failed, 77% generate less than $1,000 in monthly revenue, and 85% of tokens launched in 2025 are underwater. These projects lack self-sustainability and are unlikely to reach the next funding round, let alone exit via listing.

The Shift in Investment Institutions’ Allocation: From Gambling to Selection

For strategic investors and VC firms, 2026 marks a watershed: either adapt quickly to the new capital allocation logic or be ruthlessly eliminated by the market.

Wintermute’s 4% approval rate is not a boast of their pickiness but a warning to the entire industry—those still using the old “spray and pray” investment model will lose badly. The core issue is that the market has shifted from speculation-driven to institution-driven. When 75% of funds are trapped in pension funds and hedge funds, when retail investors flock to AI stocks, and when the rotation cycle of competing coins shortens from 60 days to 20 days, VC that still spreads investments widely chasing only stories is actively giving away money.

The market’s bloody lessons prove what is truly real: GameFi and DePIN narratives fell over 75% in 2025, AI-related projects averaged a 50% decline, and in October’s liquidation cascade, $19 billion of leveraged positions were liquidated. All these point to one truth—the market no longer pays for narratives, only for execution and sustainability.

Investment institutions must achieve three fundamental shifts:

First is a fundamental change in investment standards. From “how big can this story be” to “can this project demonstrate self-sustainability in seed rounds.” No longer can large amounts of capital be poured into early-stage; instead, they should either concentrate on a few high-quality seed projects or shift to mid and late rounds to reduce risk. Data shows that in post-2025, late-stage investments account for 56%, not by chance but as a result of market voting with their feet.

Second is redefining investment tracks. The integration of AI and crypto is not a trend but a reality—2026 will see over 50% of investments in AI-crypto crossover fields. Institutions still investing in purely narrative-driven coins, ignoring compliance, privacy, or AI integration, will find their projects unable to access liquidity, list on mainstream exchanges, or achieve successful exits.

Third is evolving investment methodologies. Outbound sourcing will replace passive waiting for project pitches; accelerated due diligence will replace lengthy evaluations; rapid responses will replace bureaucratic processes. Meanwhile, structural opportunities in emerging markets—AI Rollups, RWA 2.0, stablecoin applications in cross-border payments, fintech innovations—must be explored.

VCs need to shift from a “gambling for 100x returns” mentality to a “hunting for survivors” mindset. No longer should they use short-term speculation to filter projects but adopt a long-term vision of 5-10 years to identify teams that can truly survive and reach listing.

Wintermute’s report is a wake-up call for the entire industry: 2026 is not a natural extension of a bull market but a battlefield of winners-take-all. In an era of highly concentrated “coordination number,” those who adapt early to precise investment aesthetics—whether entrepreneurs or investors—will dominate when liquidity returns.

Those still clinging to old models, old thinking, and old standards will find their projects failing one after another, tokens going to zero, and exit channels closing one after another. The game has changed, the rules have changed. The only constant is this: Only projects and institutions with real self-sustainability, the ability to survive to listing, and an understanding of the new “coordination” logic deserve capital in this era.