Crypto funds have begun resembling VC funds more than hedge funds, following a tough year; Polychain Capital raises $175M for fund with a 7-year lockup period
Olga Kharif / Bloomberg : Tweets: @ttfacer and @alastairjmarsh Tweets: Tim Facer / @ttfacer : Crypto funds morph into venture capitalists shunned in ICO boom • Polychain's $175 million fund includes 7-year lockup provision • More digital asset venture funds are opening than hedge funds https://www.bloomberg.com/... @olgakharif via @technology #VC #HedgeFunds Alastair Marsh / @alastairjmarsh : Polychain Capital, which reached more than $1 billion in assets right before the 2018 market crash, just raised $175 million for a new fund! https://www.bloomberg.com/... via @technology @olgakharif @crypto
Context & Ripple Effects
Polychain Capital began as a liquid digital-asset hedge fund — the vehicle a16z and USV seeded with $10M in late 2016, run by Coinbase's first employee. It then rode the mania phase, when the number of crypto hedge funds doubled to 226 in four months with $3.5B–$5B under management, before the 2018 crash erased much of that.
Now the world's largest crypto hedge fund is restructuring around venture economics: a $175M fund carrying a 7-year lockup, after a year in which it lost roughly $200M for investors following a 2,303% prior-year return. More digital-asset venture funds are opening than hedge funds — the trading-desk model that defined the category is being swapped for illiquid, long-duration positions.
First-order effects
- Limited partners in the new fund accept a 7-year lockup, converting what was a redeemable hedge-fund stake into venture-style illiquid exposure to Bitcoin, Ether, and other digital assets.
- Polychain's own economics shift accordingly: after taking about $150M in fees across its history, it is repositioning from performance-driven trading returns toward the longer fee horizons of a venture franchise.
Second-order effects
- Rival crypto managers face a terms problem: if the largest player can raise on a 7-year lockup while more venture funds open than hedge funds, liquid-token funds must either match the duration or compete for a shrinking pool of short-horizon capital.
- Portfolio companies gain a different kind of backer — one that cannot exit into thin markets, pushing support toward longer holding periods rather than momentum trading.
Third-order effects
- If the structure holds, crypto asset management consolidates around VC-style vehicles whose fate tracks startup outcomes rather than token prices — though the pattern cuts both ways: years later, crypto-focused VC funds were still struggling to raise even during a rally as limited partners demanded tangible gains after the 2022 wipeout.
- The lockup era also reshapes deal-making downstream: startups' move to open-ended, rolling funding rounds reflects the same pressure on funds to deploy capital on venture timelines rather than trade it.
The trend: Crypto fund management is migrating from liquid hedge-fund trading toward locked-up venture structures, with each market cycle resetting which model limited partners will fund.