Binance Research: crypto market shrank broadly in first half of 2026

The crypto market did not undergo a rotation between sectors in the first half of 2026, but rather a broad contraction across the board. That is the conclusion of Binance Research in a comprehensive report on on-chain market developments from January to June 2026. Total DeFi value fell by $43.4 billion, and the combined market capitalisation of six major Layer 1 networks shrank by $246.5 billion.

In brief:

• Total DeFi value fell 38% and the market capitalisation of six major Layer 1 networks fell 42% in H1 2026.
• Ethereum ETF holdings shrank from over 6 million to 5.2 million ETH, while companies actually hold more ETH.
• L2 user activity plummeted 77%, while prediction markets grew strongly due to the World Cup and other events.

Ethereum is available at OKX and Bybit.

Ethereum: less ETF holdings, more corporate capital

Notable is the shift in who holds Ethereum. Spot ETF portfolios shrank from over 6 million ETH to 5.2 million ETH. At the same time, companies that put digital assets on their balance sheet expanded their ETH position from 6 million to 7.7 million ETH. As a result, corporate capital now comfortably exceeds the ETF sector.

Cheaper block space on the Ethereum network does not lead to higher revenues, meanwhile. Since the gas limit was raised to around 60 million, average gas prices fell 75% compared to 2025. The number of transactions increased by about 50%, but network revenues are on track for a decline of 53% over the whole of 2026. The Ethereum price currently stands at $1.900, an increase of 1.1% in the past 24 hours.

Layer 2 networks and Solana under pressure

Generic Layer 2 networks are losing users faster than the market as a whole is shrinking. The total number of user operations on L2 networks fell by approximately 77% from January to June, while Ethereum itself saw only 9% less activity. In June, all L2 networks together earned around $15 million in transaction fees, but contributed only $66.397 to Ethereum. That amounts to a margin of nearly 99%, raising questions about value transfer to the base network.

Solana also had a difficult first half: network revenues fell 64.5%. BNB Chain stood out negatively as the only major Layer 1 with a deflationary nature. The annualised burn rate stood at 5.05%, meaning that there is net less BNB in circulation.

Security and prediction markets

In terms of security, the sector recorded no fewer than 207 incidents in the first half of 2026, with total damages of $972 million. These are substantial amounts that show the sector remains vulnerable to attacks and exploits.

A bright spot is the prediction markets, which grew strongly. Partly thanks to the World Cup and other major events, monthly trading volume rose by 86% to $51.6 billion in June. Kalshi and Polymarket together accounted for 92% of that volume. Earlier we reported that Binance US is applying for a CFTC licence for prediction markets, further illustrating the rise of this segment.