The crypto venture market is recovering, but the rebound is increasingly concentrated among established companies. Galaxy Research reported that venture capital firms deployed $5.6 billion across 384 deals in the second quarter of 2026, with 78% of capital going to later-stage startups — companies that have moved beyond the seed stage. Only five new crypto venture funds were raised during the quarter, the lowest quarterly total since the third quarter of 2019.

Joanna Liang, founding partner at Jsquare, views the shift as a market reset rather than a conventional slowdown or a decline in innovation. In an interview with Metaverse Post, Liang discussed why Jsquare is maintaining its Web3 focus as much of the venture industry turns toward artificial intelligence, how she evaluates founders and emerging sectors, and why she believes global on-chain finance could become a core part of the financial system over the next five to 10 years.

Early-stage investing amid a market reset

Capital rebounded in the second quarter, but it was directed mainly toward later-stage companies, while the number of new venture funds reached its lowest level since 2019. Liang said this environment could benefit dedicated early-stage investors because AI has attracted substantial capital and talent and prompted many crypto venture firms to shift their focus.

“I see this as a market reset rather than a decline in innovation,” Liang said. “That creates opportunities for dedicated early-stage investors like us, because we face less competition and more attractive valuations. That is what I have seen over the past two years.”

Since launching its $50 million fund in 2025, Jsquare has invested in 17 Web3 projects, generally writing checks of around $1 million. The firm focuses on on-chain trading, lending and borrowing, real-world assets (RWA), prediction-market settlement (platforms where users trade on the outcomes of future events) and related areas. It has also invested in later-stage companies including Kraken and BitGo, with checks of more than $5 million per project.

“I believe the next wave of crypto growth will be driven by real financial adoption, not just token speculation,” Liang said.

AI within a Web3 investment strategy

Jsquare’s focus remains Web3, including when it invests in companies connected to AI. Liang said the firm looks for AI-related businesses that address problems within the Web3 ecosystem.

She cited Nebula Security as a recent example. The company’s thesis is that AI is making cyberattacks more sophisticated, while the growing amount of capital held on-chain is creating significant demand for security solutions. Jsquare approached Nebula Security proactively and invested because it addresses on-chain security problems.

According to Liang, Nebula Security has already uncovered several significant vulnerabilities, including more than 700 Linux kernel zero-day vulnerabilities — previously unknown software flaws that have no patch available at the time of discovery — and more than 10 Chrome and Firefox zero-day vulnerabilities, among others.

Lessons from more than 100 investments

Liang said it is difficult to identify a single favorite investment. She started Jsquare in 2021 with her own capital and has invested in more than 100 projects to date.

Her strategy has developed around two complementary opportunities. The first is regulated financial infrastructure, including Circle, CoinList, FV Bank, Kraken and BitGo. Liang said credible and compliant institutions are essential to bringing crypto into mainstream adoption.

The second area is financial and technological innovation, which she said excites her more. Pudgy Penguins, Metis and Big Time have demonstrated how ambitious founders can continue adapting and exploring new opportunities in Web3, according to Liang.

Through Jsquare’s new fund, the firm invested at the earliest stage in Mog, a perpetual decentralized exchange similar to Papertrade. Mog allows users to trade stocks and crypto assets with 1,000x leverage, meaning traders can take on exposure far larger than the capital they post.

Liang said her experience across these projects has reinforced the importance of founders over their initial business plans. Strong founders can revise product strategies and find new product-market fit as market conditions change.

The founder qualities Jsquare prioritizes

Liang identified three qualities that are difficult to assess in a pitch but are important predictors of performance: integrity, genuine passion for the mission and adaptability.

“Integrity comes first,” she said. A brilliant founder without integrity can become a costly mistake for a fund, based on her experience with past investments.

She also looks for founders who genuinely care about what they are building rather than simply pursuing the latest popular narrative. Narratives change quickly, she said, and durable businesses cannot be built without genuine passion.

Adaptability has been one of the strongest predictors in her experience. Crypto markets change rapidly, and the best founders can acknowledge mistakes, learn quickly and pivot, Liang said.

Distinguishing durable businesses from short-term trends

Liang said she begins by asking whether users will continue using a product after the surrounding hype has disappeared. For on-chain finance, her primary focus, she examines real users, retention, transaction volume, revenue and security.

Continued usage without token incentives is a strong sign of product-market fit, she said. In her view, that can indicate a durable business capable of operating through both bear and bull markets.

She is more cautious about blockchain-based AAA gaming, social applications and shopping. Those sectors require seamless user experiences, and she said blockchain does not yet add enough value to them.

Meme tokens, meanwhile, remain a major source of attention among retail investors. Liang described meme trading as a recurring phenomenon in which attention returns during each cycle, many tokens rise and people continue trading. However, she said most individual meme tokens are short-lived.

“Attention will always come back, but the hype around each token usually doesn’t last,” Liang said. “Real demand can create durable businesses. Catching attention for a short while creates only temporary opportunities.”

Regulation, jurisdiction and financial innovation

The factors Liang weighs depend on the sector. For payments and other regulated financial services, jurisdiction, licensing and access to banking come first. Without those elements, payments is a risky business, and even a strong product cannot scale without a viable regulatory path.

For innovative on-chain products, she places greater weight on the team and the underlying mechanism. She cited Mog’s approach to leveraged trading and liquidity provision. Its core innovation is a treasury that builds liquidity from trading activity, allowing markets to operate without traditional order books or external market makers.

Liang said such financial innovation could create entirely new sources of alpha. Ultimately, her confidence comes from a strong team, a genuine market need and a compelling risk-reward profile. She is willing to accept technology risk but said she will not compromise on integrity or accept structural risk.

Stablecoins, RWA and on-chain finance

Over the next 12 to 18 months, Liang said she is particularly positive on global on-chain finance, including stablecoin payments, on-chain trading, lending and borrowing, and prediction markets. She expects these sectors to see the fastest adoption as regulation is put in place in the United States.

She is also focused on AI-powered security because security becomes more important as additional capital moves on-chain.

Traditional finance is moving on-chain rapidly, and Liang views RWA as a major theme with significant long-term potential, particularly tokenized stocks — blockchain-based representations of traditional equities. She said that, when she last reviewed the data, tokenized stocks had reached around $3.4 billion, and she expects them to grow exponentially over the next few years.

Growth could be slower for non-standardized RWA products such as real estate and local on-chain products because liquidity and distribution remain significant challenges, she said.

Regulated custody is another important theme. BitGo, one of Jsquare’s portfolio companies, has more than $65 billion in assets on its platform. Jsquare also invested in Walapay, a PayFi business that connects stablecoins — digital tokens pegged to fiat currencies such as the US dollar — with traditional banking systems for faster and cheaper cross-border payments. Walapay announced a few months ago that it had already processed $2.5 billion. Together, those figures offer a measure of how much financial activity already runs through on-chain infrastructure.

Liang does not plan to drop any major investment verticals. Instead, she intends to direct more capital toward areas demonstrating real adoption, strong revenue growth and clear value capture.

Fund horizon and exit routes

Jsquare’s fund has a five-year term, and Liang’s goal is to return capital to investors within five years. More broadly, she would like to see some portfolio companies survive at least two or three market cycles, equivalent to five to 10 years.

The portfolio includes several potential exit routes. Jsquare takes a long-term approach, with outcomes depending on each company’s development, market conditions and available liquidity events.

For early-stage DeFi (decentralized finance) and on-chain finance products, token liquidity will likely be the primary exit route. For payments, security and AI-Web3 startups such as Walapay and Nebula Security, Liang sees potential for strategic acquisitions or eventual initial public offerings over the long term.

She noted that Circle and BitGo have gone public and said she is looking forward to a potential Kraken IPO.

For Liang, success has two dimensions: delivering real returns to Jsquare’s limited partners and outperforming Bitcoin over the current market cycle, while also seeing portfolio companies solve real problems and sustain themselves for at least five to 10 years.

Larger-scale exposure and Jsquare’s long-term thesis

If capital were not a constraint, Liang said Bitcoin would be her first choice for larger-scale crypto exposure. Among other assets or companies, she would choose a market leader in on-chain finance, particularly in trading or lending, such as Uniswap and Aave — a decentralized exchange and a decentralized lending protocol, respectively — which she described as the biggest leaders in their sectors.

She believes on-chain financial activity will grow substantially over the next five to 10 years, especially as US regulation becomes clearer and more real-world assets move on-chain. She said she would like to own a meaningful stake in such leaders, using at least 2% of total fully diluted valuation (FDV) as a benchmark.

Over the next three to five years, Jsquare’s priority is to build a strong track record by identifying and backing exceptional early-stage companies while working toward meaningful returns and distributions for limited partners from its first fund. The firm still has capital to deploy, and Liang said disciplined investing and strong performance should come before any new fundraising.

Jsquare’s long-term investment thesis is global on-chain finance. Liang believes crypto will reshape how value is owned, transferred and accessed. In her view, stablecoins and tokenized real-world assets will become core infrastructure for global finance, and Jsquare aims to be at the forefront of that transformation.