When the Hype Machine Stopped: Tracing the Fate of 2021's High Tide Rush in Crypto Funding

Remember 2021? That was the year when the cryptocurrency world seemed unstoppable. Bitcoin shattered the $60,000 barrier, Ethereum hit record highs, and digital art pieces traded hands for astronomical sums. Everyone was convinced we were witnessing the birth of Web3 and the metaverse—the next frontier of human civilization. The capital world certainly believed it.

The Funding Fever That Swept Through Crypto

What followed was unprecedented: venture capital firms threw caution to the wind, racing to fund anything remotely labeled “Web3.” The numbers tell the story—crypto tech startups pulled in $25.2 billion that year, representing a mind-boggling 713% leap from the $3.1 billion raised in 2020. This high tide rush transformed every founder into a potential billionaire and every investor into a believer.

Yet when we examine the aftermath four years later, the reality is sobering. Among the 400+ projects that attracted substantial capital during this period, only a tiny fraction remain genuinely operational. The rest? They’ve either shut their doors permanently, reinvented themselves as different projects, suffered catastrophic hacks, became dormant shells (zombie projects), or simply evaporated like morning dew. According to recent analysis, 67 representative projects from the top 400 funded startups have already ceased operations or gone dormant—projects that collectively raised over $5 billion.

The Centralized Finance Collapse: Trust Destroyed

The most dramatic casualties emerged in the centralized finance sector. Platforms that once promised to bring “institutional legitimacy” to crypto crashed in spectacular fashion:

Celsius Network raised $750 million and lured users with an enticing 18% annual yield promise. Its native token CEL was once worth $8. Today? It trades at $0.02—a 99.73% obliteration. Users who bet their savings on those generous returns learned a harsh lesson about too-good-to-be-true economics.

BlockFi, Voyager Digital, Babel Finance, and Prime Trust collectively pulled in over $500 million, each positioning themselves as the “professional” and “reliable” face of crypto finance. During the 2022 liquidity crisis, they fell like dominoes. What was supposed to be evolution toward maturity turned out to be a house of cards.

The NFT and Metaverse Mirage

A different kind of collective delusion gripped the NFT and metaverse sectors. In 2021, the narrative was intoxicating: own virtual land, collect digital art, earn by playing games. The hype machine had found its perfect fuel.

Axie Infinity embodied this dream. With $159.5 million in funding and its AXS token reaching $164.9, the game became a phenomenon—especially in developing nations. The Philippines saw workers abandoning their jobs for full-time “gold farming,” treating the game as their ticket out of poverty. But when the underlying economics cracked, AXS crashed 99.49% to just $0.85. Players discovered what they’d really been participating in: a system that required an endless stream of new money to sustain itself.

The Sandbox promised to revolutionize the metaverse. With $93 million raised, its virtual land NFTs flew off the shelves in 2021, and SAND reached $8.4. Fast forward three years: the metaverse sits virtually empty. Event attendance is sparse. The official social media account still posts updates, but the comment sections echo with silence.

Most NFT platforms targeting artists and musicians? They’re now dormant, abandoned by users who realized the value was never in the art itself—only in the hope of finding a greater fool to buy it next.

The Brutal Arithmetic of Survival

The pattern emerging from 2021’s wreckage is unforgiving: approximately only 5% of projects actually created sustainable value. And here’s the cruel part—you typically only recognize that 5% when the market has already collapsed, when speculation has burned out completely, when the survivors reveal themselves through the fog of the bear market.

This wasn’t mere bad luck. These weren’t isolated failures. This was the inevitable result of a market driven more by narrative and FOMO than by fundamentals. When capital floods in without discernment, it chases hype rather than building. When every project needs to promise 100x returns to attract investors, mathematics becomes the enemy.

Lessons for the Next Cycle

As 2025 approaches and the market potentially enters another growth phase, history whispers its warnings. The projects standing today will face the same crucible that 2021’s darlings faced. Will they still be dressed for swimming when the high tide inevitably recedes?

The answer, based on the evidence, is likely no for most of them.