Crypto venture capital has been in a deep sleep for nearly two years, according to Michael Dempsey, managing partner at venture firm Compound.
Dempsey’s explanation is simple: builders who once pursued crypto are now focused on artificial intelligence, and the money is following them.
Dempsey made the remarks in an October 13, 2026 interview on the Empire podcast.
A two-year lull, by Dempsey’s account
Dempsey described crypto venture activity as nearly dormant. According to the research summary of his comments, the stagnation dates back to 2024.
He contrasted the current environment with 2021, when tech entrepreneurs flocked to crypto, eager to build on what they saw as the next big platform.
Today, Dempsey said, the wider tech sector is focused almost entirely on AI. The shift is drawing both people and capital away from crypto projects and toward AI work.
Why Compound’s view carries weight
Compound is not a crypto-only firm with an axe to grind. It manages over $200M in assets and invests from the seed stage through Series A.
The firm spreads its early-stage investments across AI and machine learning, robotics, biotech and crypto. This portfolio mix gives Dempsey a side-by-side view of how founder interest is shifting between categories.
The token incentive problem
Dempsey did not attribute crypto’s slump solely to a loss of talent. He also identified a structural issue: token incentives.
He acknowledged that tokenization has real potential benefits, but stressed that token incentives have struggled to deliver long-term alignment.
What the shift means for crypto builders and investors
The research summary accompanying Dempsey’s comments presents the slowdown as a possible sign of investor caution. On that interpretation, backers are moving toward projects with stronger fundamentals and away from speculative stories.
This does not mean crypto venture is finished. Compound still lists crypto as one of its four investment areas.
