Crypto Investors Shift Capital Toward Infrastructure Over DeFi Amid Liquidity Constraints

Crypto investors and institutional players are increasingly prioritizing infrastructure development over speculative ventures like decentralized finance (DeFi) in 2026. A recent survey by the digital asset conference CfC St. Moritz indicates that 85% of respondents ranked infrastructure as their top funding priority. The shift reflects a broader industry focus on building robust market plumbing to support institutional capital inflows.

Respondents highlighted liquidity constraints and market depth as key obstacles to large-scale adoption. The need for stable settlement, clearing, and custody solutions has become more urgent as crypto markets mature. About 84% of respondents described the macroeconomic environment as better than neutral for crypto growth, though they noted that current infrastructure remains inadequate.

The survey also revealed a shift in expectations around innovation. While optimism about future growth and development persists, fewer respondents anticipate a sharp acceleration in innovation compared to the previous year. This reflects a more measured approach.

Why Did This Shift Occur?

The move toward infrastructure aligns with broader trends in crypto markets, particularly increased regulatory clarity and institutional participation. The survey noted a sharp improvement in perceptions of the US regulatory environment, now ranked second-most favorable for digital assets behind the UAE. This shift is attributed to developments in stablecoin legislation and clearer rules for banks and regulated participants.

At the same time, expectations for crypto IPOs have cooled. While listings are still expected to continue, fewer investors express confidence in high valuation outcomes due to valuation resets and liquidity issues.

How Did Markets React?

Institutional capital is increasingly being directed toward core infrastructure projects. For example, Polymarket recently partnered with Circle to strengthen its onchain financial markets using native USDC for dollar-denominated settlement. This collaboration reflects a broader trend of integrating stablecoins into institutional-grade systems. Similarly, CME Group is exploring the launch of a proprietary crypto token to support 24/7 trading and tokenized collateral.

Venture capital is also flowing back into the sector, with $1.4 billion committed in early 2026. Notable deals include Visa-linked stablecoin issuer Rain securing $250 million in funding to reach a $1.9 billion valuation and crypto custodian BitGo completing a $200 million-plus IPO.

In parallel, India is finalizing a cross-border crypto data-reporting system aimed at enhancing global tax transparency. This initiative is expected to be operational by next year and could serve as a model for international cooperation in crypto regulation.

What Are Analysts Watching Next?

Analysts are monitoring how market infrastructure evolves to address liquidity constraints and settlement bottlenecks. The success of initiatives like Circle's USDC integration and CME's potential token launch could influence future capital flows. Another key area is regulatory alignment. The CFTC recently approved Polymarket for domestic operations in the U.S., following a $1.4 million fine and exit in 2022. This development highlights the importance of navigating complex regulatory landscapes for onchain financial services.

Finally, the broader macroeconomic environment remains a critical factor. Bitcoin has slid to a 15-month low, and sentiment gauges indicate "extreme fear" in the market. Analysts point to Federal Reserve uncertainty, a rising dollar, and global bond stress as key drivers of this selloff.

Market participants are also observing the role of tokenized cash and blockchain-based solutions in expanding 24/7 trading and improving capital efficiency. These developments could redefine how institutions approach crypto markets.

Investors are keeping a close eye on whether infrastructure improvements can help overcome current liquidity issues and attract larger pools of capital. The outcomes of these efforts could determine the next phase of crypto market development.