The cryptocurrency industry is undergoing a significant shakeout, with over 100 projects shutting down in 2026, reminiscent of the dot-com crash. This wave of closures is primarily affecting unsustainable startups, particularly in layer-2 networks and protocol tooling, as the value of many altcoins has plummeted by 70% to 90%.

Industry Consolidation Underway

In the first half of 2026 alone, more than $1.1 billion was lost due to exploits, leading to immediate bankruptcies as venture capital funds dwindle. Notable firms like BitMEX and BitMart announced closures in late July, highlighting a broader trend across exchanges, wallets, DeFi lending protocols, NFT marketplaces, and layer-1 blockchains. The shutdown of Moonbeam, a Polkadot parachain, left users stranded, emphasizing the impact on various sectors. The Ethereum layer-2 ecosystem, which saw rapid growth since 2023, is now contracting as the market for general-purpose layer-2 solutions becomes oversaturated. Many projects struggled to differentiate themselves, leading to unsustainable business models. Ben Fisch, CEO of Espresso Systems, noted that the proliferation of similar products has triggered a consolidation phase in the sector. Marek Olszewski, co-founder of Celo, indicated that the consolidation is occurring across the entire crypto landscape, signaling maturity in the industry. Nick Puckrin from Coin Bureau remarked that the current situation reflects a necessary phase of "creative destruction" for the next cycle.

Revenue Models Under Scrutiny

A significant issue contributing to the closures is the failure of the token-as-revenue model. Many projects relied on compensating engineers and funding operations with tokens, which worked only as long as those tokens maintained their dollar value. With the recent loss in altcoin values, forecasts have become unreliable, leading to the downfall of projects like Tally and Step Finance, which could not generate traditional revenue. Additionally, the crypto sector is facing unprecedented levels of exploits, with $1.1 billion lost in the first half of 2026, surpassing total losses from the previous year. The majority of these incidents were linked to sophisticated attacks, notably involving North Korean hackers.

Zombie Contracts Pose Risks

The aftermath of the closures has left numerous “zombie contracts” on the blockchain—smart contracts that continue to operate even after their teams have dissolved. This issue poses risks to users with stranded assets and unresolved vulnerabilities in the code.

Survivors Thrive Amidst Challenges

Despite the turmoil, some projects are thriving by generating revenue in traditional currencies rather than relying on their own tokens. Hyperliquid, a decentralized exchange, surpassed $1 billion in cumulative fees and commands a significant market share. Aave and Ether.fi have also reported substantial deposits and revenue, demonstrating that projects that meet real market needs can endure. The current wave of closures marks a pivotal moment for the cryptocurrency sector, as only those with solid business models and genuine user demand are likely to survive this challenging period.