Inside Dragonfly Capital fourth fund and its $650 million bet on crypto’s next phase

Investors are revisiting their views on crypto as dragonfly capital quietly raises fresh money for a new phase of the market.

New $650 million fund in a bruised crypto market

Crypto is the overlooked middle child of tech right now, squeezed between headline-grabbing AI labs and specialized AI startups. However, despite a few bright spots for blockchain technology, from ongoing enthusiasm around stablecoins to faint optimism about crypto market structure legislation, sentiment has sunk to an all-time low.

Prices have slumped without an obvious villain like Gary Gensler or Sam Bankman-Fried to blame, leaving many investors disillusioned. Moreover, retail interest has faded, and casual observers increasingly treat digital assets as yesterday’s story, even as infrastructure continues to advance behind the scenes.

Amid this prolonged winter, the blockchain venture firm Dragonfly Capital has managed to close its $650 million fourth fund. General partner Rob Hadick said the firm sidestepped the “mass extinction event” that hit many peers, as numerous dedicated crypto funds struggled to raise fresh capital or shuttered entirely.

Backing category winners like Polymarket and Rain

Hadick attributes the successful raise primarily to timely stakes in a set of perceived category leaders that persuaded limited partners to recommit. These include Polymarket, the prediction market platform, and Rain, a stablecoin-powered card issuer positioning itself at the intersection of payments and on-chain finance.

However, underneath those headline wins lies a multi-year conviction that crypto would increasingly intersect with Wall Street rather than evolve into a fully realized Web3 version of the internet. While many VCs chased consumer-facing Web3 apps during the last cycle, Dragonfly directed more of its attention toward financial plumbing and regulated-adjacent infrastructure.

That thesis is now central to how the firm presents its dragonfly capital fund to backers. The partners argue that as regulators clarify rules and traditional institutions become more comfortable with digital assets, platforms tied to trading, payments, and tokenized real-world instruments will capture the bulk of the value.

From China roots to a Wall Street-facing strategy

Dragonfly launched in 2018 as a partnership between Alex Pack, then leading crypto investments at Bain Capital Ventures, and Bo Feng, a well-known figure from the early Chinese internet ecosystem. The firm initially straddled the U.S. and China, reflecting where both capital and crypto innovation were concentrated at the time.

The early years were rocky. The separation from Pack became something of lore in blockchain VC circles, highlighting the pressures of building a dedicated digital asset franchise. Moreover, the firm ultimately pulled back from China altogether following the Chinese government’s sweeping crackdown on crypto, which effectively pushed many local projects and exchanges offshore or out of business.

Under the leadership of Haseeb Qureshi and Tom Schmidt, Dragonfly rebuilt its identity and reputation. Over time it emerged as one of the sector’s more prominent investors, participating in a broad range of token and equity rounds across DeFi, infrastructure, and trading platforms during the industry’s boom-and-bust cycles.

Fintech convergence reshapes the investment playbook

The arrival of Hadick from the traditional finance world in 2022 marked another turning point for the firm. With his background in conventional markets, Dragonfly sharpened its focus on the growing overlap between crypto rails and fintech, leaning into a view that digital assets would increasingly plug into existing financial systems.

Schmidt describes the current period as “the biggest meta shift” he has seen during his time in the industry. In his view, investors now recognize that there will be fewer native application tokens, which previously underpinned much of the venture model in crypto, and more tokens tied to real-world assets such as stocks or private credit funds.

That said, this shift represents a significant change for founders and investors who had built strategies around app-specific tokens and speculative demand. Instead of trying to recreate every internet function on-chain, the new emphasis falls on tokenizing existing assets, integrating payment flows, and building compliant structures that can interface with banks and brokerages.

From rebellion to integration with global finance

There is an unavoidable comedown in this direction for blockchain technology, which originally positioned itself as a rebellion against Wall Street and governmental control of global finance. Early boosters framed the movement as a way to replace entrenched financial intermediaries, not to supply them with new infrastructure.

However, as the industry matures, the narrative has shifted from overthrow to integration. Schmidt argues that even if the rebellious aura has faded and the sector appears less glamorous, it is crucial not to ignore the scale of what has been built in a little over a decade.

He points out that digital, internet-native money has grown from “zero to a trillion dollars in 10 years,” underscoring how far the ecosystem has come since Bitcoin first emerged. Moreover, this growth has persisted through multiple boom-and-bust cycles, regulatory battles, and technology shifts, suggesting that the underlying trend remains intact even as sentiment fluctuates.

In summary, Dragonfly’s new $650 million vehicle, anchored by bets on platforms like Polymarket and Rain, reflects a broader repositioning of crypto around regulated markets, tokenized real-world assets, and closer alignment with traditional finance rather than a pure Web3 vision.