The Era of Restraint: Cryptocurrency Venture Capital Risks in the First Half of 2026

Author: @Fromadistance11 & @ryanyoon_eth, Tiger Research

Data Source: RootData

The capital in the cryptocurrency market is undergoing a paradigm shift, gradually concentrating on specific fields and companies. Tiger Research and RootData conducted an in-depth study of this shift in the capital market using data from 9,416 investment transactions recorded from 2018 to the first half of 2026.

Key Points

• The capital inflow in the first half of 2026 reached $13.3 billion, which is comparable to the total of $13.2 billion for the entire year of 2024. Nevertheless, the number of financing rounds dropped to only 435, a 78% decline from the peak of 1,978 rounds in 2022.

• Today's market is divided among a few large crypto-native venture capital firms (VCs) focused on leading investments and venture capital departments of exchanges competing for liquidity, while medium-sized investment institutions lacking clear competitive advantages are being rapidly pushed out of the market.

• Financing rounds in the gaming sector decreased by 96%, plummeting from 141 rounds in 2024 to just 5 rounds in the first half of 2026.

• Capital inflows into the payments and stablecoin sector and the centralized exchange (CEX) sector are entirely driven by mergers and acquisitions (M&A).

• Traditional financial institutions participated in 54.5% of all recorded investment transactions in the first half of 2026.

1. The Market in 2021: Speed and Diversification as Core Strategies

The core strategies of the cryptocurrency investment market in 2021 were speed and portfolio diversification. That year, investors executed 1,750 transactions, including seed rounds. The competition for speed was extremely fierce, with AU21 Capital alone averaging over 13 transactions per month.

Investment decisions at that time were simplified to basic criteria such as Token Generation Event (TGE) timelines and token economics (the mechanisms that determine the issuance and distribution structure of project tokens). Since returns could be generated solely from token issuance without developing any actual products, venture capitalists largely adopted a "spray and pray" strategy, spreading capital across dozens or even hundreds of projects while ignoring their valuations.

Execution speed took precedence over thorough due diligence. New financing rounds closed almost instantly, and VCs that missed one round often chased the next round at higher valuations, with this fear of missing out (FOMO) pattern repeating throughout the industry.

Many VCs that employed this strategy failed to survive the subsequent bear market, while those that did adapt their approaches fundamentally.

2. Which VCs Survived: Changing Landscape

2.1. Leading Investment Situations Past and Present

The first metric to examine is leading investment situations, which historically have been dominated by large VCs.

Some VCs remain active leaders today, while others have completely disappeared or only recently emerged. Since leading a financing round always requires the reputation and capital scale that only large VCs possess, those institutions that have led significant rounds in the past have proven their resilience, with most still ranking among the top ten today.

2.2. How Surviving VCs Differentiate

Data from the recent period between 2024 and the first half of 2026 shows that crypto-native VCs and established large institutions are concentrating their resources on leading investments, participating more deeply in single transactions. Their business models have shifted to: reducing the total number of transactions while raising the standards for due diligence, and seeking board seats and greater influence over project governance.

However, a different pattern has emerged in the total number of follow-on investments beyond leading roles.

Among the top 15 VCs participating in rounds from 2024 to the first half of 2026, exchange-affiliated institutions accounted for a significant share. Exchanges showed far more enthusiasm for follow-on investments than for leading investments. @cbventures ranked first with 140 transactions, @OKX_Ventures second with 94 transactions, and @yzilabs (the institution rebranded from Binance Labs in January 2025) third with 92 transactions.

Ranked seventh, @HashKeyCapital is the venture capital department of the Hong Kong Stock Exchange @HashKeyExchange; ranked fourteenth, @mirana is the venture capital department of @BybitOfficial. Five major exchanges made it into the top 15 solely through their venture capital departments. In contrast, large VCs focused on leading investments, such as @polychain and @PanteraCapital, ranked lower in this overall measure of round participation.

CEX-affiliated VCs have established themselves as core participants in major financing rounds, leveraging the liquidity and marketing support provided by their platforms. Medium-sized VCs, lacking clear defensive advantages (whether in economies of scale, brand recognition, or exchange-level liquidity support), are being rapidly pushed out of the market under the dual pressures of capital constraints and exit failures.

2.3. Exiting VCs: The End of the "Spray and Pray" Strategy

Most VCs that built large portfolios by relying on quick token cash-outs during the last bull market have since vanished. @AU21Capital, LD Capital, and @shimacapital saw their transaction volumes drop by as much as 98.9%, effectively losing their influence in the market. Once the prolonged bear market and stricter regulatory periods set in, strategies based on chasing short-term narratives became ineffective.

The primary reason for their failure was the inability to form a truly differentiated advantage; equally noteworthy is that the flow of crypto capital has widely shifted toward projects with a certain level of maturity, with almost no new projects requiring early funding emerging. In other words, the types of opportunities these VCs relied on have disappeared from the market.

3. Investment Rounds: Buy the Fruit, Not the Seeds

3.1. The Collapse of Seed Rounds

In the first half of 2026, the total number of seed stage transactions was 81, an 88% decline from 694 in 2022. The market's aversion to early projects with unproven business models and higher risks is evident. This decline is also reflected in the overall structure of financing rounds: seed rounds accounted for 35.3% of all transactions in 2022, while this proportion dropped to 18.7% in the first half of 2026.

The reduction in seed rounds reflects both investors' risk-averse mentality and the absolute shortage of new early projects seeking seed funding. This is an indicator capturing both market contraction and market maturation.

3.2. Capital Concentration in Later Stages

In terms of capital allocation, Series A and later rounds now account for 75.2% of total investments. During the bear market of 2023, seed stage investments briefly held a majority share, but once the market entered a recovery phase, capital quickly reallocated to well-funded companies.

In the first half of 2026, the total amount raised in Series A financing ($745 million) exceeded all funds raised in the seed stage ($423 million), becoming the largest category among all rounds.

The average transaction size at each stage shows a clear stepwise increase:

• Seed Round: $5.4 million

• Series A: $22.4 million

• Series C: $127 million

• Series E: $202 million

Although the sample size in later stages is smaller, companies reaching these stages have achieved revenue and valuation growth, leading to larger financing amounts involved in each round.

4. Overall Market: Capital Concentration, Declining Transaction Volume

4.1. Divergence of Capital and Transaction Volume

In the first half of 2026, total capital inflow reached $13.3 billion, while the total transaction volume of 435 transactions accounted for only 22% of 2022's total (the highest annual transaction volume year, with 1,978 transactions). From 2024 to 2026, even as capital concentrated in fewer transactions, the total amount of capital remained stable or increased.

The small diversified bets by VCs chasing short-term returns around token liquidity events have decreased, while large direct investments from traditional financial institutions have increased. Institutions have adopted stricter standards, assessing not the TGE timelines or market narratives, but whether companies have auditable revenue structures and necessary regulatory licenses.

In the first half of 2026, there were 32 transactions reaching or exceeding $100 million, accounting for 7.4% of all transactions, a significant increase from 1.1% in 2024. During the same period, the average transaction size roughly quadrupled, rising from $11.7 million in 2024 to $47.4 million in the first half of 2026.

This increase in share is driven by two factors: an increase in the number of large transactions themselves, and the disappearance of small transactions, including seed rounds, leading to a decline in total transaction volume. A small number of surviving projects have begun to dominate the market, and as small transactions disappear, the previously limited large transactions occupy a larger share in relative terms.

4.2. Direct Participation in Venture Capital Rounds

The proportion of investment transactions involving traditional financial institutions rose from 29.2% in 2018, first surpassing half in 2021 at 53.9%. Their participation dropped to 45.2% during the last downturn in 2023, rebounding to 54.4% in 2024 as regulatory clarity increased, falling back to 50.9% in 2025, and reaching 54.5% in the first half of 2026. Since first crossing the half mark in 2021, their participation has remained high.

For example, @a16z led a $355 million financing round initiated by @digitalasset (the developer of @CantonNetwork), but core institutional participants including BNP Paribas, HSBC, S&P Global, and Hanwha Investment Securities were direct investors, not through venture capital subsidiaries.

Previously, investments primarily entered at the earliest stages, but now the growth of crypto venture capital firms and the entry of traditional investors have prompted more capital to shift toward companies with a certain level of maturity.

5. Segment Tracks: Surviving in a Changing Environment

In 2024, the approval of the spot Bitcoin ETF, along with a more favorable regulatory environment, generated the first clear capital flow at the track level since the bear market, which this analysis uses as a benchmark year for sector comparisons.

In 2024 (the year the Bitcoin ETF was approved), the infrastructure sector accounted for the majority share of total investment capital at 50.9%. By the first half of 2026, this proportion had dramatically dropped to 14.8%. In its place, payments and stablecoins (25.3%), centralized exchanges (18.2%), and prediction markets (17.5%) have taken the lead, completely reshaping the sector landscape.

This shift indicates that the characteristics of blockchain infrastructure have changed from independent investment targets to practical platforms for institutional business use. Typical cases include @RobinhoodApp running its own Layer on Arbitrum, and Securitize using Solana and Avalanche as settlement layers before and after its listing on the New York Stock Exchange. In other words, the core demand of the current capital market is no longer to build new protocol infrastructure from scratch, but to operate real-world financial services on top of existing infrastructure layers.

5.1. Lagging Sectors: Gaming, NFTs, and Social

The transaction numbers and capital inflows in these three sectors have sharply declined.

• Gaming: From 141 transactions to 5; capital plummeted from $758.6 million to $44.8 million.

• NFTs: From 27 transactions to 2; capital dropped from $114.9 million to $14.7 million.

• Social and Entertainment: From 74 transactions to 11; capital fell from $512.1 million to $70.1 million.

The gaming industry has seen the most severe decline. The early GameFi model combined gaming with token rewards, overly relying on token issuance for financial returns rather than building sustainable gameplay. Once new user growth slowed, this model fell into a "death spiral" (a structural cycle where declining token value and user loss reinforce each other), with no way out. This ultimately led to user traffic data, which was once a key indicator for due diligence, losing reliability, and capital inflow into the sector being effectively cut off.

5.2. DeFi: Quietly Advancing but Steadily Growing

The transaction volume in the DeFi (decentralized finance) sector decreased by 71%, but the total investment amount only dropped by about 34%. The average transaction size actually increased from $4.5 million in 2024 to $10.4 million in the first half of 2026, indicating that capital is concentrating on a few large transactions.

The main driver of this concentration comes from the lending protocol Morpho's token sale round aimed at institutions and investment firms. @Morpho raised $175 million in a financing round led by @a16zcrypto, @paradigm, and @RibbitCapital on June 9, 2026. The protocol opens the DeFi treasury market to institutions through modular lending and redefines DeFi risk standards. This single financing round accounted for 17.7% of the total DeFi investment in the first half of 2026, clearly reflecting the market's high concentration.

In other words, the DeFi sector has deviated from broad ecosystem growth, with capital flowing toward a few already market-validated protocols.

5.3. Payments and Stablecoins: The Fastest Growing Sector

The number of transactions in the payments and stablecoins sector continues to accelerate. During the same period, total investment surged nearly twentyfold, from $143.9 million to $2.85 billion in the first half of 2026. However, a large portion of this is attributed to a few large M&A transactions.

• Mastercard acquired BVNK for $1.8 billion in March.

• Payward (the parent company of Kraken) acquired Reap for $600 million in May.

These two transactions alone accounted for about 84% of the total investment in this sector in the first half of 2026. Cross-border payment and crypto payment card issuers, including @raincards ($250 million) and @KASTxyz ($80 million), have also steadily secured funding, supporting the growth of this sector.

These large-scale mergers indicate that traditional payment companies and major Web3 institutions are directly acquiring and controlling stablecoin infrastructure. Stripe is the clearest example in this competition for ecosystem standards, starting with its acquisition of Bridge in October 2024. Subsequently, Stripe partnered with Paradigm to launch the blockchain Tempo focused on stablecoin payments (mainnet launched in March 2026).

The global alliance stablecoin project Open USD (OUSD), involving over 140 companies, has adopted Bridge and Tempo, controlled by Stripe, as core infrastructure. This indicates that the competition over stablecoins has completely transcended company-level acquisitions, evolving into a competition for global market standard-setting.

5.4. CEX: No Longer Needing Venture Capital

The share of total investment in the centralized exchange (CEX) sector surged from 3.0% in 2024 to 18.2% in the first half of 2026. However, this is not an expansion of traditional VCs into new exchanges, as from 2024 to the first half of 2026, merger and acquisition activities accounted for 75.5% of all CEX investments (this ratio was as high as 78.9% in 2025), reflecting overwhelming concentration.

Investment amounts have decreased from the previous year's peak (when large M&A transactions concentrated, reaching $19.4 billion), but are still more than six times that of 2024 ($340 million). The pace of transactions has also been very stable, averaging 3.8 transactions per month in the first half of 2026.

The CEX investment market showcases a reshuffling around a few large operators. Major transactions include Naver's stake in Dunamu (still under review), Coinbase's $2.9 billion acquisition of Deribit, Kraken's $1.5 billion acquisition of NinjaTrader, and the $2 billion strategic investment by Abu Dhabi's sovereign fund MGX in Binance. Meanwhile, existing exchanges' venture capital departments (such as OKX Ventures and HashKey Capital) are increasingly active in investments and acquisitions. CEX participants are increasingly taking on the dual roles of investment targets and strategic investors.

5.5. Prediction Markets: The Rise of a New Sector

Prediction markets have emerged as a field providing liquidity for real-world macro indicators (such as economic data, elections, and policy decisions). The trigger point for this explosion was the formal regulatory approval from the U.S. Commodity Futures Trading Commission (CFTC) in May 2025, opening the door for large-scale capital from hedge funds and asset management companies to enter the regulated mainstream market.

• @Kalshi: Cumulative transaction volume surpassed $100 billion by June 2026. It previously secured $1 billion financing led by Paradigm and Coatue in December 2025 and subsequently.

• @Polymarket: Received significant investment from the Intercontinental Exchange (ICE), raising approximately $1.6 billion in total.

Rather than being an arena for numerous new projects, prediction markets have formed a solidified structure: traditional financial institutions and top capital repeatedly inject large sums into the two giants that first obtained regulatory approval.

5.6. Custody: Low-Key but Powerful

Investment in the custody sector grew fifteenfold, from $2.04 million in 2024 to $317.1 million in the first half of 2026. Among them, Anchorage raised $100 million in strategic investment in the first half of 2026, accounting for about one-third of the investment during that period.

For institutional asset management companies wishing to hold crypto assets directly, compliant custody infrastructure is essential. The growth of this sector is closely related to the increasing demand for asset management and custody from institutions.

The discussed fields share a commonality: through large financing, they maintain a stable capital flow foundation; and in each case, this infrastructure demand is created by the demand of institutions entering the market.

6. New Standards for Crypto Capital: From Betting to Control

Overall, the focus of cryptocurrency investment has shifted from sowing short-term seeds to holding infrastructure and protocols.

Before the approval of the Bitcoin ETF and the regulatory improvements in 2024, the crypto market was a blind betting field dominated by small investments scattered across numerous projects driven by narratives. This strategy ultimately led to the collapse of the gaming and NFT sectors and eliminated VCs that clung to this strategy.

In contrast, today's capital targets are no longer short-term gambles, but rather gaining long-term control over their investment targets and on-chain infrastructure. Capital is concentrating heavily on a few targets that have obtained auditable revenue structures and regulatory licenses, or simply acquiring equity to control the infrastructure itself.

In the past, investments in early projects served as signals sent by VCs to the market. Investment behavior was interpreted as "smart money" entering, thereby raising token prices or attracting retail investors to participate early. However, this direct acquisition of infrastructure and obtaining licenses through structural capital does not send signals for retail investors to follow.

Retail investors no longer react strongly to VC investment news, fundamentally due to this structural change in market funding. Now, retail investors must also weigh potential investments with the same extreme caution as current VCs. The old "betting" strategy is no longer applicable to retail investors or VCs.

About RootData

RootData is a Web3 asset data platform launched in early 2022, providing a systematic investment and financing database for crypto investors and founders. It now processes over 3.4 million monthly search queries and is used by over 2 million crypto users. RootData's data and research have been cited by mainstream media and institutions such as The Wall Street Journal, Cointelegraph, Binance Research, and The Block. The platform structures the information investors need for decision-making, from discovering crypto projects to tracking funding and analyzing investor profiles.

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