Digital asset investment firms invested $2.7bn in decentralized finance (DeFi) projects in 2022, 190% more than in 2021, as investments in centralized finance (CeFi) projects went the other way, falling 73%. % to $4.3 billion over the same period.
The staggering rise in DeFi funding came despite overall crypto funding figures falling from $31.92 billion in 2021 to $18.25 billion in 2022 as the market turned from bullish to bearish.
According According to a March 1 report from CoinGecko, citing data from DeFiLlama, the numbers “potentially point to DeFi as the new high-growth area for the cryptocurrency industry.” He points out that the decrease in financing to CeFi could indicate that the sector “reaches a degree of saturation”.
The nearly three-fold increase in DeFi investing is also a staggering 65-fold increase from 2020, at the start of the last bull run.
According to CoinGecko, the largest DeFi funding in 2022 came from the Luna Foundation Guard (LFG) $1 billion LUNA token sale in February 2022, which came about three months before the catastrophic collapse of Terra Luna Classic (LUNC). ) and TerraClassicUSD (USTC) in May.
Ethereum native decentralized exchange (DEX) Uniswap and Ethereum staking protocol Lido Finance raised $164 million and $94 million respectively.
Meanwhile, FTX and FTX.US were the largest recipients of CeFi funds, having raised $800 million in January, representing 18.6% of CeFi funds in 2022 alone. However, the crypto exchange crashed. just 10 months later and filed for bankruptcy.
Other areas of investment included blockchain infrastructure and blockchain technology companies, which raised $2.8 billion and $2.7 billion respectively, a trend that has remained strong over the past five years, CoinGecko said.
Henrik Andersson, the chief investment officer of Australia-based asset fund manager Apollo Crypto, says his firm is looking at four specific sectors within cryptocurrency of late:
The first one is “NFTfi”, which according to him results from the combination of DeFi and NFT. These are NFT projects that use DeFi to implement various trading strategies for passive income, or long or short trade NFT projects, among other things.
I have not bought any NFTFI tokens
just waiting @nftperp to cast a token.
Anything derived from perp beats other categories
wen launch pic.twitter.com/yaW6HNkIGN
— Saint DeFI (@TheDeFISaint) February 17, 2023
The second and third are on-chain derivative platforms and decentralized stablecoins, which Andersson believes have come about due to the recent FTX crash and recent regulatory action:
“In light of the FTX debacle and regulatory moves, we have seen a renewed interest in on-chain derivatives platforms such as GMX, SNX and LYRA. Everyone watching record volume/TVL. Decentralized stablecoins like LUSD/LQTY have also benefited from the current regulatory environment.”
After @LiquityProtocol Binance listing, combined with the recent SEC crackdown on Centralized Stablecoins has highlighted this narrative.
Let’s take a look at TOP 15 Decentralized Stablecoins pic.twitter.com/XWJvWpaT4l
— HC-Capital (@hc_capital) March 5, 2023
The fourth vertical cited by Andersson was layer 2 networks based on Ethereum. “2023 will be the year of L2, and in particular Ethereum L2,” he said.
The chief investment officer explained that Layer 2 tokens like Optimism (OP) have been performing well of late, particularly in light of the launch of the “Base” testnet, which was created by Coinbase and is powered by Optimism.
GMX, SNX, LYRA, LQTY and OP are investments of Apollo Crypto.
Related: VC Funding: A Beginner’s Guide to VC Funding in the Crypto Space
Last month, cryptocurrency analyst Miles Deutscher predicted in a Feb. 19 Twitter post to his 301,700 followers that zero-knowledge cumulative tokens, liquid stake derivative tokens, artificial intelligence (AI) tokens, Perpetual DEX tokens, “real yield” tokens, GambleFi tokens, decentralized stablecoins, and Chinese coins would all do well in 2023 thanks to strong funding:
To get the biggest gains in crypto, you need to position yourself on the strongest narratives.
Some of the trends described in this thread still have the potential to generate 50 times more leads.
: 8 Crypto Narratives I’m Watching Right Now.
— Miles Deutscher (@milesdeutscher) February 18, 2023
However, VC funding in the crypto space has fallen for the past three consecutive quarters amid tough market conditions, according to recent data.
