Q3 cryptocurrency financing continues to cool down, with funds shifting towards later stages and strategic rounds

Overview

In the third quarter of 2026, Bitcoin rose by about 43%, but the primary cryptocurrency market continued to cool down. RootData recorded a total of 199 financing deals, with disclosed amounts totaling $4.46B; the number of deals has declined for four consecutive quarters. However, the market has not come to a standstill, and the direction of funds and the sources of investment have undergone profound changes.

VC activity has significantly cooled down. The number of deals decreased by 5% quarter-on-quarter, and the disclosed amounts fell by 24%.

Funds are flowing into later and strategic rounds. Strategic rounds and private rounds accounted for about $1.75B, while early rounds only accounted for about $0.73B. Excluding public company secondary offerings, IPOs / de-SPACs, mergers and acquisitions, token public offerings, OTC, and debt financing, this quarter's equity financing consisted of 144 deals with a disclosed amount of about $3.38B, up 12% quarter-on-quarter and up 35% year-on-year; the number of deals decreased by 14% quarter-on-quarter and by 36% year-on-year. The total amount year-on-year decreased by 74%, mainly due to the high base from public company secondary offerings and IPOs in the third quarter of 2025.

The median amount has rebounded, but large transactions have decreased. The median disclosed amount rose from $6.0M to $8.0M; transactions over $100M decreased from 17 to 13, and the top ten transactions' share fell from 62% to 57%. The most significant decrease was in disclosed small transactions under $5M.

Most of the money was invested in centralized financial companies like exchanges and brokerages. CeFi recorded 31 deals, taking 32% of the disclosed amounts; DeFi had 51 deals, the most in number, but only captured 8%.

The amount of transactions solely involving crypto-native capital decreased by nearly 60%. The disclosed amount for these transactions fell from $2.57B to $1.05B; transactions involving traditional finance or general capital saw their share rise from 39% to 45%.

The outlook for the next round of financing is pessimistic. This quarter, only 3 new crypto venture funds completed fundraising, totaling about $1.3B, marking the lowest number of new funds since the third quarter of 2019.

I. Bitcoin Price Rises, but the Primary Market is Cooling Down

This quarter, RootData recorded a total of 199 financing deals, of which 116 disclosed amounts totaling $4.46B. The number of deals decreased by 5% compared to the second quarter, and the amount decreased by 24%; compared to a year ago, the amount decreased by 74%.

The high base in the third quarter of 2025 included a large number of public company secondary offerings and IPOs: Strategy about $2.52B, Forward Industries about $1.65B, Galaxy about $1.40B, Bullish IPO about $1.11B. After this round of "coin-stock" financing receded, it saw a significant year-on-year decline of 74%. The $22.19B in the fourth quarter was similar, with nearly half coming from a single $10.3B acquisition by Dunamu.

Looking only at equity financing, the conclusion is the opposite. Excluding public company secondary offerings (Post-IPO), IPOs / de-SPACs, mergers and acquisitions (M&A), token public offerings, OTC, debt financing, and community rounds, and removing transactions over $100M that were verified to belong to old stock transfers, token pre-sales, public company financing, or debt, this quarter's equity financing consisted of 144 deals with a disclosed amount of about $3.38B, higher than the approximately $3.02B (168 deals) in the second quarter and about $2.50B (226 deals) in the third quarter of 2025, indicating a quarter-on-quarter increase of 12% and a year-on-year increase of 35%, with the number of deals decreasing by 14% quarter-on-quarter and by 36% year-on-year. There are fewer transactions, but they are larger in size.

More noteworthy is the divergence between the price of cryptocurrencies and financing. Bitcoin rose from about $58.6K in early July to about $83.6K in early October, an increase of about 43%, yet the primary market did not warm up accordingly. We believe an important reason is AI's absorption of capital: the demand for funding for AI computing power and models is enormous, and the market has higher expectations for its growth potential; with limited allocation for LPs, some funds originally directed towards crypto venture capital are shifting towards AI. The actions of leading crypto-native institutions also confirm this: on July 8, Paradigm announced the completion of its fourth fund at $1.2B, expanding its investment scope from crypto to AI, robotics, and other frontier fields, while stating it would continue to invest in crypto; IOSG founding partner Jocy Lin established IOSF Ventures focused on AI; on October 22, a16z Crypto was renamed a16z Frontier, with the new fund's investment scope expanded to AI, autonomous machines, and other cutting-edge technologies, while continuing to invest in the crypto field.

The fluctuations during the quarter mainly came from a few large deals. July was the hottest month, with $2.37B across 72 deals, with Crypto.com, Ionic Digital, and Securitize each receiving $400M. August was the coldest, with $0.72B across 63 deals. September rebounded to $1.37B across 64 deals, mainly from Polymarket's $300M and Félix's $200M.

II. Funds Flowing into Later and Strategic Rounds

This quarter, nearly 40% of funds fell into strategic rounds and private rounds, totaling about $1.75B. Early rounds had the most deals, but the amount only accounted for about one-sixth.

Early rounds remain the most active, with 80 deals, accounting for 40% of all transactions, but in terms of amount, they are merely supporting roles: transactions outside of early rounds captured about 84% of the disclosed amounts.

In terms of individual deal size, there were 25 mid-range transactions between $20M and $100M (excluding $100M) this quarter, with a disclosed total of about $1.15B, up from 19 deals and about $0.77B in the second quarter. However, this quarter, 7 of these deals belonged to OTC, debt financing, public company secondary offerings, or mergers; looking only at equity financing, mid-range transactions consisted of 18 deals totaling about $0.87B, with the number of deals remaining the same as the second quarter (18 deals, about $0.73B), and the amount increasing by about 19%, still lower than the third quarter of 2025 (31 deals, about $1.03B).

This not only reflects a decrease in risk appetite but is also related to the replacement of investors: some crypto-native investment institutions have stopped new investments, liquidated, or shifted towards AI. In December 2025, after Shima Capital was sued by the SEC, it was reported that the founder announced his resignation in an internal email to invested projects and initiated an orderly liquidation of the fund. In June 2026, Arbitrum DAO's gaming investment plan AGV proposed to stop new investments and only manage the existing portfolio, a proposal that was approved in early July, with approximately 143.7 million ARB to be returned to the DAO treasury in batches. In October, Deus X Capital ceased operations and will officially liquidate on January 31, 2027, with CEO Tim Grant transitioning to CEO of AI company TensorX. At the end of the month, Verda Ventures, focused on stablecoin infrastructure, stopped investing in new projects due to the founder joining Tether and shifted to only servicing the existing portfolio.

Meanwhile, traditional finance and strategic capital are filling the gap. Citadel Securities invested $400M in Crypto.com at a valuation of $20B; Nasdaq Ventures, a subsidiary of Nasdaq, agreed to invest $100M in Kraken's parent company Payward, with a reported valuation of about $21B. 1789 Capital led a round of about $1B financing for Polymarket, contributing about $300M, with a valuation of $21B. Tiger Global led Augustus's $180M Series B; SBI Holdings led EDX Markets' $76M Series C and also led Gauntlet's $125M Series C. These funds are directed towards more certain and compliant areas such as licensing, clearing, and trading entry points, rather than new narratives.

III. Sector: Funds Buying "Financial Pipelines"

According to RootData's main tags, CeFi had 31 deals this quarter, taking $1.44B, accounting for 32% of the disclosed amounts, ranking first. DeFi had 51 deals, the most in number, but only captured $0.37B, accounting for 8%.

Most of the large deals in CeFi are related to trading, brokerage, and clearing entry points: Crypto.com, Kraken, Augustus, Alpaca, EDX Markets. Infra ranked second, with 34 deals totaling $0.76B, represented by Ripple (Ripple Prime $275M senior unsecured notes), Prime Intellect, and Gauntlet. Additionally, there are two $400M single transactions each supporting a tag: the Bitcoin mining company Ionic Digital and Securitize, which went public on the NYSE through a SPAC.

The amount in DeFi is relatively low, partly due to insufficient disclosures: only 25 out of 51 deals disclosed amounts. Even considering this, DeFi is clearly dominated by small, early, protocol-oriented transactions. Consumer categories are almost empty: the gaming main tag only had 3 deals, totaling about $5.9M.

IV. Transactions Solely Involving Crypto-Native Capital Decreased by Nearly 60%

Transactions solely involving crypto-native capital saw disclosed amounts drop from $2.57B in the previous quarter to $1.05B this quarter, with the share falling from 44% to 24%; transactions involving traditional finance or general capital saw their share rise from 39% to 45%.

"Traditional finance or general capital" refers to banks, exchanges and market infrastructure, brokerages, asset management, tech giants, trading firms, as well as comprehensive and fintech VCs. Crypto-native capital is contracting, while the biggest deals this season are backed by Citadel Securities, Nasdaq, 1789 Capital, Tiger Global, Peak XV, SBI, Intel Capital, and ICONIQ.

In terms of frequency, the picture looks different. The most active are YZi Labs and Coinbase Ventures, but both primarily focus on incubation and follow-on investments, with almost no lead investments.

Compared to the second quarter, the leaders have changed. The most active in the second quarter were Coinbase Ventures (13 times), Animoca Brands (12 times), and a16z Frontier (formerly a16z Crypto, 8 times), with Paradigm also leading 4 deals. This season, more pricing power has been handed over to the aforementioned traditional financial institutions.

5. More New Companies, Established Companies Raising Big Money

Companies established in 2021 and earlier raised $2.30B from 51 financing rounds this season, accounting for more than half of the disclosed amount. New companies established after 2025 had the most rounds, with 67, but only raised $0.63B.

The list of established companies raising large amounts of financing is familiar: Crypto.com (established in 2016), Kraken (2011), Ripple (2013), Securitize (2017). They have revenue, licenses, and valuable businesses, which align perfectly with this season's funding preferences.

6. The U.S. Still Dominates Geographically

RootData's country field only covers 53 out of 192 projects (28%), corresponding to 55 transactions and $2.19B, approximately half of the disclosed amount for the entire season. In this sample, the U.S. had 28 transactions totaling $1.52B; Singapore had 10 transactions totaling $444M, with Crypto.com accounting for $400M of that.

The remaining countries are quite scattered. The UK, Bulgaria, and Italy each accounted for $90M, France $57M, and Nigeria and South Africa each $40M; Hong Kong had 3 transactions, Japan 2 transactions, with amounts being small. Despite such low coverage, it still indicates that funding remains highly concentrated in the U.S., with large transactions in Asia primarily coming from exchanges in Singapore.

7. Fundraising: The Next Round of Ammunition is Tight

How much can be invested in the primary market ultimately depends on how much funds can be raised. According to Galaxy Research, only 3 new crypto venture funds completed fundraising this season, totaling about $1.3B, the lowest number of new funds since Q3 2019. On an annualized basis, fundraising this year is about $8.2B, slightly lower than $8.75B in 2025. The average fund size this year is about $386M, with a median of only $71M: most new funds are small, while a few large funds have raised the average.

The difficulty in fundraising and the cooling of the investment side are two sides of the same coin: spot ETFs, digital asset treasury companies, and AI are all competing for LP allocation. Our judgment is that tighter financing on the LP side will make GPs more cautious: prioritizing support for follow-on rounds of already invested projects and placing more bets on companies with revenue and licenses. This is also reflected in the investment trends this season.

8. Conclusion

Overall, VC investment activity cooled in Q3; funds are flowing towards financial channels that can charge fees, hold licenses, and clear transactions, with pricing power increasingly handed over to traditional financial institutions; VC LP fundraising has encountered a chill, and the follow-on financing situation for startups is not optimistic.

For entrepreneurs, the timing for raising large amounts of funding has been pushed back, and the requirements are closer to those of mature companies: revenue, licenses, and distribution channels are more likely to translate into valuation than narratives. Early-stage financing has significantly decreased, VC risk appetite has lowered, and there is a need to be prepared to speak with product data and to accept smaller first rounds.

For investors and LPs, the rebound in cryptocurrency prices has not automatically transmitted to the primary market. This season, Bitcoin rose about 43%, yet financing continued to decline, temporarily breaking the old script of "rising coin prices lead to booming venture capital." The mid-range transaction amounts of $20M–100M rebounded quarter-on-quarter, but the number of equity deals remained flat, requiring more quarters of data to confirm the trend.

What to watch in Q4:

Whether traditional finance can continue to participate. This season, 45% of the disclosed amounts involved them. Is this a structural change or just a coincidence of a few large deals? Q4 will provide the answer.

Whether cryptocurrency prices can transmit to early rounds. Only a rebound in the number of small early rounds would indicate a real recovery on the entrepreneurial side.

Policies and fundraising. The progress of the CLARITY Act and whether new funds can complete fundraising before the end of the year.