Crypto shakeout deepens: 100+ projects shut in 2026

Over 100 crypto projects have shut down, filed for bankruptcy or gone permanently dark in 2026, according to data from RootData, and the pace is accelerating. Four major firms announced closures or filings within a single week in late July alone: BitMEX, BitMart, Movement Labs and Storj Labs.

The exits span every layer of the industry including exchanges, wallets, DeFi lending protocols, NFT marketplaces and layer-1 blockchains. Moonbeam, a Polkadot parachain, shut down permanently on July 31, stranding users who had not bridged their assets off the chain in time.

Ethereum's layer-2 ecosystem has been shrinking from its explosive early growth. Layer-2 networks surged in 2023 after advances in technology dramatically reduced transaction costs and made it easy for companies to launch their own chains. As launching a chain became easier, the number of general-purpose layer-2s ballooned, creating a crowded market with little differentiation.

"There were way too many general-purpose layer twos, which frankly don't make sense as a product, because there's no reason to have many, many versions of the same thing," Ben Fisch, CEO of Espresso Systems, told CoinDesk. "We're in a consolidation phase for general-purpose layer twos, not layer twos broadly."

Industry leaders argue the shakeout reflects a broader shift across crypto rather than a problem unique to Ethereum scaling networks.

"Consolidation is happening across all of crypto right now, not just layer two, from DeFi protocols to DEXs and infrastructure providers. It's a sign that the industry is maturing. The networks continuing through this period are the ones people actually use and depend on," Marek Olszewski, co-founder of the Celo layer-2, told CoinDesk.

"For every crypto project that you hear about shutting down, there are perhaps another 10 silently doing the same," Nick Puckrin, founder of Coin Bureau, wrote in a post on X. "Creative destruction for the next cycle perhaps."

Orkun Mahir Kılıç, co-founder and CEO of Chainway Labs, which is building the Bitcoin layer-2 Citrea, said the wave of closures reflects a maturing market where capital is harder to raise and investors are becoming more selective.

"Different businesses have different reasons and different underlying problems for shutting down. The pattern we're seeing emerge isn't really an inherent problem within the L2 ecosystem. The market and the tech are maturing, investment is a lot slower and more cautious now, and only projects with sound business models and a clear problem statement will survive," Mahir Kılıç told CoinDesk.

He argued the pattern is common across technology industries. "This pattern of closure and consolidation isn't unique to L2s or crypto; it's pretty common in tech. We saw a similar pattern play out when the internet bubble burst, and we'll probably see the same emerge with AI before long."

In his view, the current shakeout ultimately strengthens the ecosystem. "So is consolidation good? Painful in the short term, healthy in the long run. It resets the baseline back to retention and real usage," Mahir Kılıç said. "Chains that expected users to migrate simply because the tech was better are the ones now shutting down or merging. The ones left standing will be the ones that meet users where they already are."

Lorenzo Valente, director of research at Ark Invest, reiterated the point on crypto's consolidation. "I believe crypto is going through the biggest consolidation phase in its history, far more profound than in previous bear markets," he wrote on X. "The market structure has changed. Capital is much more selective, and teams and exchanges without real PMF are shutting down. Revenue concentration is now at all-time highs across almost every layer apps, middleware, L1s etc: Hyperliquid and Pump.fun account for 67% of total app revenue."

The 2026 wave is structurally different from crypto's last major collapse in 2022, when fraud and interconnected leverage brought down Terra, Celsius and FTX in rapid succession. This time, there is no single point of contagion; instead there is an industry-wide reckoning that is unwinding all of the optimism from when crypto-friendly U.S. president Donald Trump took office in early 2025.

Most of the projects now winding down were never generating revenue in the traditional sense. They paid engineers in tokens, subsidized liquidity in tokens and funded security audits in tokens. As long as those tokens held their dollar value, the system worked. The vast majority of altcoins lost between 70% and 90% of their value during the recent bear market, making runway calculations wildly inaccurate.

Tally, a DAO tooling platform that powered governance for over 500 protocols including Uniswap, Arbitrum and ENS, processed more than $1 billion in payments and helped secure up to $80 billion in onchain value. It still could not survive. "There isn't a venture-backed business in governance tooling for decentralized protocols, at least not yet," co-founder Dennison Bertram wrote when announcing the shutdown.

Step Finance, a Solana portfolio tracker and analytics platform, raised enough to build a real product. In January, a phishing attack on an executive's device drained 261,854 SOL, worth around $35 million, from the protocol's multisig wallet. Rescue capital never arrived. The team explored "every possible path forward, including financing and acquisition opportunities," nothing worked and the platform shut down in February.