Authors: @Fromadistance11 & @ryanyoon_eth, Tiger Research
The capital in the crypto market is undergoing a paradigm shift, gradually concentrating on specific sectors and companies. Tiger Research and RootData have conducted an in-depth study of this transformation 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 equivalent to the annual total of $13.2 billion in 2024. Nevertheless, the number of financing rounds has dropped to only 435 rounds, down 78% from the peak of 1,978 rounds in 2022.
The current market is divided among a few large crypto-native venture capital firms (VCs) focusing on leading investments and venture departments of exchanges competing for liquidity, while mid-sized investment institutions without clear competitive advantages are being rapidly squeezed out of the market.
The financing rounds in the gaming sector have decreased by 96%, plummeting from 141 rounds in 2024 to only 5 rounds in the first half of 2026.
Capital inflows into the payments and stablecoins sector as well as 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 strategy of the crypto investment market in 2021 was speed and portfolio diversification. That year, investors executed 1,750 transactions, including seed rounds. The competition for speed was extremely fierce, with AU21 Capital completing over 13 transactions per month on average.
Investment decisions at that time were simplified to basic criteria such as token generation event (TGE) timelines and token economics (mechanisms determining project token issuance and distribution structure). As returns could be generated solely from token issuance without the need to develop 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 at higher valuations, perpetuating a fear of missing out (FOMO) pattern across the industry.
Many VCs employing this strategy failed to survive the subsequent bear market, while those that did adapt fundamentally changed their approach.
2. Which VCs Survived: The Changing Landscape
2.1. Historical and Current Leading Investment Patterns
The first indicator to examine is leading investment patterns, historically dominated by large VCs.
Some VCs continue to lead investments actively today, while others have either disappeared entirely or just resurfaced recently. Since leading a financing round requires the reputation and capital scale that only large VCs possess, those institutions that have previously led significant rounds have proven their resilience, with most of them still ranking among the top ten today.
2.2. How Surviving VCs Are Differentiating
Data from the recent period from 2024 to 2026 shows that crypto-native VCs and established large institutions are concentrating their resources on leading investments, participating more deeply in individual deals. Their business models have shifted to reducing total transactions while increasing standards for due diligence and pursuing board seats and greater influence over project governance.
However, a different pattern has emerged in the total number of follow-on investments excluding leading roles.
Among the top 15 VCs participating in rounds from 2024 to the first half of 2026, exchange affiliated institutions hold a significant share. The enthusiasm of exchanges to participate in follow-on investments is far higher than that for leading investments. @cbventures ranks first with 140 deals, @OKX_Ventures second with 94 deals, and @yzilabs (the entity rebranded from Binance Labs in January 2025) third with 92 deals.
Ranked seventh, @HashKey_Capital is the venture arm of the Hong Kong exchange @HashKeyExchange; ranked fourteenth, @mirana is the venture arm of @Bybit_Official. Five major exchanges have made it to the top 15 solely through their venture arms. However, large VCs focused on leading investments, such as @polychain and @PanteraCapital, rank relatively lower in this overall measure of round participation.
CEX-affiliated VCs have established themselves as core participants in major funding rounds, leveraging the liquidity and marketing support provided by their platforms. Mid-sized VCs, lacking clear defensive advantages (whether through economies of scale, brand recognition, or liquidity support at the exchange level), are being rapidly squeezed out of the market under the dual pressure of capital constraints and failed exits.
2.3. Exiting VCs: The End of the "Spray and Pray" Strategy
Most VCs that built large investment portfolios during the previous bull market by rapidly cashing out on tokens have since vanished. @AU21Capital, LD Capital, and @shimacapital have seen their transaction volume decline by as much as 98.9%, effectively losing their market influence. Once in a prolonged bear market with stricter regulations, strategies based on chasing short-term narratives became ineffective.
The main reason for their failure was the inability to establish real differentiation; it is also noteworthy that the flow of crypto capital has broadly shifted toward more mature projects, with almost no new projects requiring early funding emerging. In other words, the kinds of opportunities these VCs relied upon have disappeared from the market.
3. Investment Rounds: Buying Fruit, Not Seeds
3.1. The Collapse of Seed Rounds
The total number of transactions in the seed stage in the first half of 2026 was 81, down 88% from 694 in 2022. The market’s aversion to unproven, high-risk early projects 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 by the first half of 2026, this proportion had dropped to 18.7%.
The reduction in seed rounds reflects not only the investors' risk aversion but also the absolute shortage of new early projects seeking seed funding. It captures the indicators of both market contraction and maturity.
3.2. Capital Concentrating on Later Stages
In terms of capital allocation, later financing rounds starting from Series A now account for 75.2% of total investments. During the bear market in 2023, seed stage investments briefly made up the majority share, but once the market entered a recovery phase, capital swiftly reallocated to companies with ample funding.
In the first half of 2026, the total amount raised in Series A financing ($745 million) exceeded the total capital raised in all seed stages ($423 million), becoming the largest category among all rounds.
The average transaction size at each stage shows a clear tiered increase:
Seed Round: $5.4 million
Series A: $22.4 million
Series C: $127 million
Series E: $202 million
Although the sample size in the later stages is smaller, the companies reaching these stages have seen growth in revenue and valuation, justifying the larger amounts of funding involved in each round.
4. Overall Market: Capital Concentration, Decreased Transaction Volume
4.1. Divergence of Capital and Transaction Volume
In the first half of 2026, total capital inflows reached $13.3 billion, while the total transaction volume of 435 transactions accounted for only 22% of the total in 2022 (the year with the highest annual transaction volume, totaling 1,978 transactions). From 2024 to 2026, even though capital is concentrated in fewer transactions, the total amount remains stable or has increased.
VCs have reduced their small diversified bets around token liquidity events chasing short-term returns, while large direct investments from traditional financial institutions have increased. Institutions are adopting 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, significantly up from 1.1% in 2024. During the same period, the average transaction size roughly quadrupled, increasing from $11.7 million in 2024 to $47.4 million in the first half of 2026.
This increase in share is driven by dual factors: an increase in the number of large transactions themselves and the disappearance of smaller transactions, causing a relative increase in the share of large transactions, which were previously limited in number.
4.2. Direct Participation in Venture Capital Rounds
The proportion of investment transactions involving traditional financial institutions increased from 29.2% in 2018, first surpassing half in 2021 at 53.9%. Their participation fell to 45.2% during the last downturn in 2023 but rebounded to 54.4% in 2024 as regulations became clearer, then dipped to 50.9% in 2025, finally reaching 54.5% in the first half of 2026. Since first crossing the halfway mark in 2021, their participation has remained high.
For example, @a16z led a $355 million funding round initiated by @digitalasset (the developer of @CantonNetwork), but crucial institutional participants included BNP Paribas, HSBC, S&P Global, and Hanwha Investment & Securities, which were direct investors rather than through venture subsidiaries.
Previously, investments largely targeted the earliest stages, while now the growth of crypto VC firms and the entry of traditional investors have shifted more capital toward companies with some level of maturity.
5. Sector Segmentation: Surviving in a Changing Environment
In 2024, the approval of the spot Bitcoin ETF and the accompanying more favorable regulatory environment generated the first clear sector-level capital flows since the bear market, which this analysis will use as a benchmark year for sector comparison.
This transition indicates that the characteristics of blockchain infrastructure have changed from independent investment targets to practical platforms used for institutional business. Typical examples include @RobinhoodApp running its own Layer on Arbitrum and Securitize using Solana and Avalanche as settlement layers before and after going public on the New York Stock Exchange. In other words, the current core demand in capital markets is no longer to build new protocol infrastructures from scratch but to operate real-world financial services over existing infrastructure layers.
5.1. Lagging Sectors: Gaming, NFT, and Social
These three sectors have seen a sharp decline in both transaction numbers and capital inflow.
Gaming: from 141 transactions to 5; funding plummeted from $758.6 million to $44.8 million.
NFT: from 27 transactions to 2; funding dropped from $114.9 million to $14.7 million.
Social and Entertainment: from 74 transactions to 11; funding decreased from $512.1 million to $70.1 million.
The decline in the gaming industry is the most severe. The early GameFi model, which combined gaming with token rewards, excessively relied 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 in which token value decline and user churn reinforce each other), with no way out. This ultimately led to user traffic data, which once served as a key indicator for due diligence, losing reliability, and capital flowing into the sector being largely cut off.
5.2. DeFi: Moving Quietly but Steadily Developing
Transaction volume in the DeFi (decentralized finance) sector has decreased by 71%, yet total investment has only declined by about 34%. The average transaction size has 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 primary driver of this concentration comes from the lending protocol Morpho's token sale rounds 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 opened the DeFi vault market to institutions through modular lending and redefined DeFi risk parameters. This single financing round accounted for 17.7% of total DeFi investment in the first half of 2026, clearly reflecting the market's high concentration.
In other words, the DeFi sector has drifted away from broad ecosystem growth, with capital flowing toward a few already market-validated protocols.
5.3. Payments and Stablecoins: The Fastest-Growing Sector
The trading volume in payments and stablecoins continues to accelerate. During the same period, total investment skyrocketed nearly twenty-fold, from $143.9 million to $2.85 billion in the first half of 2026. However, a significant portion of this is attributed to a few large mergers and acquisitions (M&A) deals.
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 account for approximately 84% of total investment in this sector in the first half of 2026. Cross-border payments and crypto payment card issuers, including @raincards ($250 million) and @KASTxyz ($80 million), are also steadily securing funding, supporting the sector's growth.
These massive mergers indicate that traditional payment companies and major Web3 institutions are directly acquiring and controlling the stablecoin infrastructure. Stripe is the most clear example of this competition for ecosystem standards, starting with its acquisition of Bridge in October 2024. Following this, 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), with participation from over 140 companies, has adopted the Bridge and Tempo controlled by Stripe as core infrastructure. This indicates that the competition surrounding 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 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, mergers and acquisitions alone accounted for 75.5% of all CEX investments (this ratio peaked at 78.9% in 2025), reflecting overwhelming concentration.
Investment amounts have declined from the previous year's peak (when large M&A transactions exploded to $19.4 billion), but are still more than six times that of 2024 ($340 million). The pace of transactions is also quite 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 Abu Dhabi sovereign fund MGX's $2 billion strategic investment in Binance. Meanwhile, existing exchanges' venture departments (like OKX Ventures and HashKey Capital) are increasingly participating in investments and acquisitions. CEX participants are increasingly taking on dual roles as both 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 explosive trigger point was the formal regulatory approval from the CFTC in May 2025, opening the door for large capital inflows from hedge funds and asset management companies into regulated mainstream markets.
@Kalshi: Cumulative trading volume surpassed $100 billion as of June 2026. Previously, it secured $1 billion funding each in December 2025 and a subsequent round, led by Paradigm and Coatue.
@Polymarket: Received substantial investment from Intercontinental Exchange (ICE), raising approximately $1.6 billion cumulatively.
Rather than being an arena for numerous new projects, the prediction market has formed a solidified structure: traditional financial institutions and top-tier capital repeatedly inject large sums into the two giants that first received regulatory approval.
5.6. Custody: Low-Key Yet Powerful
Investment in the custody sector grew fifteen-fold, from $20.4 million in 2024 to $317.1 million in the first half of 2026. Among these, Anchorage raised $100 million in strategic investment in the first half of 2026, capturing roughly one-third of the investment during that period.
For institutional asset management companies looking to hold crypto assets directly, compliant custody infrastructure is essential. The growth in this sector is closely linked to the increasing asset management and custody demands from institutions.
Each of the discussed areas shares a commonality: through large financing, they maintain a stable capital flow base; and in each case, this infrastructure demand is created by institutional entry into the market.
6. New Standards in Crypto Capital: From Betting to Control
Overall, the focus of cryptocurrency investment has shifted from sowing short-term seeds to holding foundational infrastructure and protocols.
Before the approval of the Bitcoin ETF and the regulatory improvements of 2024, the crypto market was a space dominated by blind bets, with small investments spread across numerous projects driven by narratives. This strategy ultimately led to the collapse of the gaming and NFT sectors, eliminating VCs that adhered rigidly to this approach.
In contrast, the current capital targets are no longer short-term gambles but seeking 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 permissions, or simply directly acquiring equity to control the infrastructure itself.
In the past, investments in early projects served as signals to the market from VCs. Investment actions were interpreted as "smart money" entering, thereby elevating token prices or attracting retail interest early. Now, however, such structural capital acquiring infrastructure and obtaining permissions does not send signals for retail to jump in.
Retail investors no longer react strongly to VC investment news, as the underlying reason is that the market's capital has undergone this structural change. Now, retail investors must also weigh potential investments with extreme caution, similar to how contemporary VCs operate. The old "betting" strategy is no longer applicable to either retail 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 currently handles over 3.4 million monthly search queries and is used by more than 2 million crypto users. The data and research from RootData have been cited by mainstream media and organizations 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 funds and analyzing investor profiles.
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