Breaking News! 3.8 trillion "dammed lake" breach warning, private equity's "Darwin moment" arrives. Will the lightning from traditional finance strike $BTC?

The private equity industry is standing at a brutal crossroads. A recent industry report shows that the proportion of profits returned to investors has been at a low for four consecutive years, with a distribution ratio of only 14% in 2025, the lowest since the 2008 global financial crisis.

Meanwhile, there are approximately 32,000 companies waiting to be sold, with assets totaling up to $3.8 trillion. The blockage of exit channels is reshaping the entire industry landscape.

Fundraising is rushing toward leading institutions, while small and medium-sized funds are struggling. A managing partner bluntly stated that a long-anticipated Darwinian survival of the fittest is happening, and some smaller, less distinctive fund managers may face extinction.

Data shows that the fundraising scale for leveraged buyout funds in 2025 decreased by 16% year-over-year, and the number of funds successfully raising capital dropped by 23%. An analyst pointed out that many funds may have already raised their last product, but they haven’t realized it yet. Underperforming managers may quietly wind down.

Despite the total value of global M&A transactions in 2025 increasing significantly, this was mainly driven by a few mega-deals. The total number of transactions actually declined by 6%, limiting their ability to absorb the large pool of unsold assets.

Faced with this dilemma, the industry is experiencing a path split. Some managers are choosing to transfer assets into renewal funds to buy time, but this is described as “zombification.” If they cannot continue to distribute capital to investors, this model will be unsustainable.

Even if they survive, profitability for institutions is now more difficult than ever. The previous “financial engineering” model relying on cheap debt and valuation multiples expansion has become ineffective. Today, leverage costs are approaching 8-9%, and valuations are stagnant. Analysts note that portfolio companies now need to achieve about 12% annual profit growth to match the returns previously generated by 5% growth.

The difficulties faced by private equity are not isolated. The private credit market is also showing warning signs. A chief investment officer warned that the current danger signals in private credit are “strikingly similar” to the pre-2007 subprime crisis, especially pointing out the deterioration of loan covenants and liquidity mismatches.

However, some view systemic risk with caution, believing that the conditions for a large-scale market contagion are not yet in place. The over $3 trillion of uninvested capital may serve as a key buffer.

This “Darwinian moment” in traditional finance warrants vigilance from all market participants. When huge capital seeks exits within the old system but cannot find them, will it accelerate allocation to more efficient, transparent, and innovative asset classes—such as crypto assets—or seek hedges? This remains a variable to watch.

Meanwhile, in the blockchain world, new infrastructure is being built. For example, in the Sui ecosystem, Walrus is working to become a decentralized storage layer, combining AI with storage needs—an example of DePIN (Decentralized Physical Infrastructure Networks) in practice. It aims to address fundamental data storage issues and may offer an alternative answer for future asset forms.

#Walrus $WAL #Sui #DePIN @Walrus

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