Cryptocurrency prices are warming up, but the investment winter in crypto continues.

Written by: Ryan Yoon

Translated by: Luffy, Foresight News

In the third quarter of 2026, the sentiment in the crypto market shifted from panic to greed.

After two consecutive quarters of decline in the first half of the year, Bitcoin surged by 43% in Q3, marking the best third quarter performance since 2017, with the US spot Bitcoin ETF recording a net inflow of $6.34 billion. The crypto fear and greed index remained in the extreme fear zone for most of the first half of the year, entering the greed zone on August 20 and maintaining this state for most of September.

However, disclosed trading data shows that the market recovery did not lead to a synchronous increase in investments in crypto businesses.

The funds returning with rising cryptocurrency prices are being used for direct purchases of crypto assets, while corporate equity investments require funds to be locked in for years and do not change with short-term market sentiment. The following will analyze several core changes that occurred in the Q3 market.

Five Core Changes in Q3

1) Mergers and Acquisitions: From Business Expansion Acquisitions to Capability Acquisitions

The number of M&A transactions in Q3 was on par with the first half of the year, but the size of individual deals dramatically shrank.

In Q1, the total number of crypto M&A transactions was 39, in Q2 it was 36, and in Q3 it was 37, but the transaction sizes seem to have declined. Data from Architect Partners, a consultancy that tracks crypto transactions, shows that the number of crypto M&A transactions in Q3 decreased by 7% month-on-month, with transaction amounts dropping by 83%.

The shrinkage in transaction size is due to changes in acquisition targets. The acquisition logic in the first half of the year involved purchasing entire companies and expanding new business lines, such as Mastercard's $1.8 billion acquisition of BVNK. In Q3, acquisitions focused more on filling existing business gaps of the acquirers.

Circle agreed to acquire Singapore's cross-border payment company Tazapay, MoonPay plans to acquire North Capital, which holds a US securities license, and BitGo is acquiring NYDIG's institutional trading business.

Gaining licenses and building business capabilities takes a long time, while acquisitions can directly obtain relevant qualifications and capabilities. The industry structure is still in the formation stage, and saving time itself is a competitive advantage. The focus of M&A is rapidly shifting from developing entirely new businesses to acquiring specific business capabilities.

2) VC Market: Declining Influence of Top Lead Investors, Rise of Strategic Capital

In 2024 to date, the five most active lead investors (Polychain, Pantera Capital, Hack VC, Paradigm, a16z) led an average of only 2 transactions per month in Q3, compared to an average of 3.7 transactions per month in the first half of the year.

Previously, these institutions directly led 50%~75% of the transactions in the projects they participated in, dominating market valuation; now, their control over financing rounds continues to weaken.

In contrast, YZi Labs (formerly Binance Labs) participated in 14 transactions, almost three times the monthly pace of the first half; Coinbase Ventures participated in 12 transactions.

VCs associated with exchanges are increasing their investments, rooted in the fundamental differences in investment targets. Financial VCs seek capital gains from equity or token appreciation; whereas, exchange-affiliated VCs can generate more trading volume and new users for their platforms if the financed projects launch on their exchanges or chains (like BNB Chain, Base).

Therefore, even with uncertain cryptocurrency prices and valuations, these types of institutions still have clear incentives to continue investing. Q3 financing rounds were more driven by strategic investors aiming to strengthen their platforms, rather than simply pursuing pricing profits.

The VC market in Q3 is transforming, shifting from a focus on high returns from financial investments to seeking strategic investments that promote business and ecosystem synergy.

3) Financing Stage: Early Investments Becoming Cautious, Capital Betting on Verified Businesses

Investors are unwilling to take on high-risk projects that have not been verified. Seed rounds accounted for 15.0% of all transactions, the lowest quarterly share since 2024; the number of monthly transactions in seed rounds fell by 28%, more than twice the overall decline in transactions of 13%.

Disclosed investment amounts in Series A to C increased by 29% quarter-on-quarter, with the Series C financing amount in the third quarter exceeding the total of the first half.

The early investment model relied on distributing funds across many small projects, expecting to achieve high returns from a few. This model assumes that subsequent investors are willing to take over shares or tokens at higher valuations.

Investment on a corporate level in Q3 was overall cautious, with market expectations for follow-on funds weakening. Capital has shifted to focus on expansion rounds for projects with proven revenue, holding licenses, and verified businesses.

The C round financing completed by Jeeves and EDX Markets in Q3, both in the payment and trading infrastructure sectors, further indicates this trend. Market investment standards have shifted from token release plans to verifiable business proofs.

4) Financing Methods: Beyond Equity, IPOs and Debt Financing Rising

Large amounts of capital are no longer reliant solely on VC equity. In Q3, there were 13 transactions exceeding $100 million, four of which were IPO or debt financing.

Securitize went public on the NYSE through a SPAC merger, and Ripple Prime issued $275 million in unsecured senior notes. On a monthly basis, VC + strategic equity investment declined by 24%; the scale of debt financing grew from $70 million to $190 million, and IPO fundraising increased from $80 million to $150 million.

Debts and IPOs either require stable repayment capabilities or rely on public market valuations. Most debt financing subjects in the first half of the year were firms holding Bitcoin reserves, such as Metaplanet, which borrowed to increase its BTC holdings.

In contrast, the debt financing in Q3 came from businesses with stable cash flows, such as prime brokerages, cross-border remittance companies, and stablecoin lending enterprises, where the repayment basis shifted from Bitcoin prices to corporate cash flow. Some companies can now finance like traditional businesses, without relying on VCs, which could compress VCs' role in the later stages and return them to the early phase.

5) Track Landscape: Capital Flowing into Traditional Financial-Related Infrastructure

From a track distribution perspective, funding in Q3 flowed into areas that connect traditional finance with the crypto ecosystem, rather than building new Layer 1 or Layer 2 public chains.

Investment in the infrastructure sector increased its share from 8.1% in the first half of the year to 18.2%. Incremental funds primarily flowed into AI-related projects, rather than entirely new blockchain mainnets, with representative projects being Ionic Digital, transitioning to AI data centers, and Prime Intellect, an AI training infrastructure company.

Among the funds classified under "others," about half targeted security token infrastructure, such as Securitize and Alpaca, while payment and stablecoins remained the only sectors with stable capital proportions.

In contrast, sectors with weaker ties to traditional finance saw a significant drop in attractiveness. In the prediction market sector, Q3 saw only Polymarket securing approximately $300 million in financing, which accounted for 91% of total investment in that sector. DeFi investment amounts fell by 71%, with transaction numbers shrinking in tandem, accounting for only 3.0% of the total investment amount; the largest DeFi financing was for the deposit token network Cari Network, supported by a regional bank in the US. The custody sector saw no new investments, with the industry only witnessing consolidation among mature firms, a typical case being BitGo’s acquisition of NYDIG's trading business.

In Q3, capital was directed only toward mature enterprises that hold licenses and have regulatory approvals or projects collaborating with banks and other traditional financial institutions. The focus of investment has clearly shifted from new crypto ecological projects to channels and infrastructures that help traditional financial capital enter the crypto market.

Implications for Various Market Participants

Despite the rebound in cryptocurrency prices, the financing environment for crypto companies in Q3 2026 remains tight, and the direction of capital has changed: large mergers and acquisitions have decreased, acquisitions have shifted to filling specific capabilities, and the voice of strategic investors has surpassed that of traditional financial lead investors.

Capital is concentrating on companies with revenue, licenses, and verified businesses, reducing bets on early-stage projects. Continuing the trend mentioned in the previous report of focusing on risk control and fundamentals, we outline the core responses for different market participants below.

Crypto Companies and Founders

• Be prepared for extended early financing cycles: The decline in seed round transaction numbers is significantly higher than the market average. Before the next financing round, conservatively estimate fund sustainability, aim to achieve tangible milestones such as generating revenue, obtaining licenses, or reaching significant partnerships.
• Cautiously evaluate strategic investment terms: VC funds associated with exchanges are continuously entering, but investment agreements may come with constraints, such as requiring projects to launch on designated exchanges or deploy on specific blockchains. Companies need to assess whether these terms will restrict future financial financing or affect the company’s potential sale.
• Build regulatory and licensing capabilities: Recent acquirers place more emphasis on directly implementable capabilities such as securities licenses, payment networks, and trading infrastructures, rather than solely acquiring entire companies. If companies are considering selling or seeking partnerships, they need to clarify their core capabilities and how to match potential acquirers' business needs.
• Broaden financing tools: Enterprises with stable cash flows should consider traditional financing methods such as bond issuance or credit to reduce equity dilution.

Traditional Financial Institutions and Companies

• Enter the sector through acquisitions: If you want to establish a presence in the crypto business, acquiring professional companies with licenses and operational experience is more efficient than building infrastructure from scratch. Mergers and acquisitions focusing on infrastructure, licenses, and trading capabilities will continue to increase.
• Evaluate transaction value against actual terms: Merely looking at disclosed transaction amounts does not provide insight into the true valuation of the targets. Buyers should prioritize the fit of the transaction with their business and work with professional advisors to verify whether the transaction can create value exceeding its price.

Investors and Average Market Participants

• Interpret financing news cautiously: VC financing announcements do not automatically signal a buy. The era of large token sales and extremely high trading returns is hard to replicate, and average investors should realize that the profit space for early-stage projects is limited.
• Assess projects based on fundamentals: Focus on the revenue structure, compliance qualifications, and interaction with traditional finance, rather than token release plans or short-term news.

The crypto market is moving away from short-term speculation expectations towards genuine value and practical implementation. Some investors may struggle to accept this change, but the market's shift towards maturity and industrialization is a positive development sign. Participants who can understand this structural shift and strengthen their core competitiveness and risk control will be better positioned to embrace the next phase of the market.