Venture capital funds show improving paper gains but weak cash returns in early 2026, according to Carta data covering 2,775 funds with about $119.3 billion in assets. Valuations have risen for six straight quarters, yet actual cash distributions to limited partners remain minimal, particularly for funds launched after 2019.
Paper gains rise while cash returns lag
The median total value to paid-in (TVPI) ratio has continued to climb, signaling stronger portfolio valuations. However, distributions to paid-in (DPI), which tracks real cash returned, remains close to zero for most recent vintages.
Funds launched in 2019 and 2020 show only marginal cash returns, with more than half yet to return any capital. Older vintages from 2017 and 2018 have performed slightly better, but fewer than 20 percent have fully repaid initial commitments.
Much of the valuation recovery has been driven by artificial intelligence-focused companies. Still, exits remain scarce, with limited activity in public listings or acquisitions, leaving many assets marked higher but unsold.
Widening performance gap across funds
Returns remain uneven across the venture landscape. Top-performing funds continue to significantly outperform the rest, with internal rates of return above 20 percent at the 90th percentile, compared with 15.5 percent at the 75th percentile.
This divergence becomes more pronounced over time, as compounding magnifies performance differences. Higher-return funds can deliver multiples more than double those of average performers over a decade.
Capital concentrates in larger funds
Fundraising trends show a growing divide between large and small vehicles. Funds exceeding $100 million captured 57 percent of commitments in 2025, up sharply from 31 percent eight years earlier.
Smaller funds under $25 million remain numerous but account for a shrinking share of total capital. The result is a “barbell” market structure, where capital concentrates at the top while the middle tier contracts.
Carta recorded 86 new funds raising $3.9 billion in the first quarter of 2026, the strongest start since 2022. Established managers with proven track records continue to attract the majority of allocations.
Crypto funding mirrors institutional concentration
This concentration trend extends into cryptocurrency-focused ventures. June’s largest deals included $355 million raised by Digital Asset and $175 million by Morpho, both backed by major financial firms. Other notable rounds saw SignalPlus raise $50 million for trading infrastructure and Fomo secure $75 million targeting retail trading applications.
New capital commitments are also expanding into adjacent sectors. Variant and Framework Ventures launched new funds worth $222 million and $400 million, respectively, with mandates that include artificial intelligence and automation.
Meanwhile, ecosystem activity remains steady, with events such as ETHGlobal Lisbon 2026 and accelerator programs from Alliance DAO and Outlier Ventures continuing to attract developer participation.
Liquidity constraints weigh on digital assets
The gap between rising valuations and weak liquidity is also visible in cryptocurrency markets. Total market capitalization fell to $2.11 trillion by July 1, 2026, down sharply from about $3.5 trillion in late 2025.
Bitcoin began the second half at $58,494, marking its weakest first-half performance since 2022 and remaining more than 53 percent below its October 2025 peak. Ethereum has lagged further, trading near $1,570, down roughly 68 percent from its high.
Capital has increasingly shifted toward artificial intelligence equities, contributing to weaker crypto performance. Bitcoin declined about 11 percent in the second quarter, while spot Bitcoin ETFs recorded net outflows of $4.08 billion amid tighter monetary conditions.
Declining liquidity and market deleveraging
Liquidity conditions have also deteriorated. Total spot trading volumes dropped 28 percent quarter over quarter to $2.32 trillion, while stablecoin market capitalization fell by approximately $4.2 billion, reducing available on-chain liquidity.
At the same time, markets underwent significant deleveraging, with $8.35 billion in long positions across Bitcoin and Ethereum liquidated during the second quarter. This has reduced speculative excess but also created thinner trading conditions.
Sentiment remains fragile, with the Crypto Fear & Greed Index at 11, indicating extreme fear among traders.
Key levels in focus
Traders are closely monitoring Bitcoin’s support range between $58,000 and $59,000, which was tested in late June. A sustained break below this zone could open the door to further declines, while a move above $64,270 would signal early signs of recovery.
Overall, the first half of 2026 reflects a market defined by higher valuations but limited liquidity, concentrated returns among top funds, and capital increasingly flowing toward larger, established platforms.
Explore how institutional shifts shape liquidity and valuations in crypto and DeFi in 2025 for macro-aware investing.
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