Disclosure: The views and opinions expressed herein are solely those of the author and do not represent the views and opinions of the crypto.news editorial.
crypto Startups crypto-projects-have-received-over-90-billion-in-all-time-funding” target=”_blank” rel=””>insured more than $90 billion in financing by February 2024, with more than 230 deals and nearly $1.3 billion at the start of the year. Venture capitalists mainly funded decentralized finance, infrastructure, blockchain gaming, nft and web3 projects.
However, only a small portion of funding was allocated to crypto financial services in 2024. This is in stark contrast to previous years, particularly in the 2021 bull market, when this sector accounted for a substantial portion of venture capital investments.
Despite this recent trend, I believe investors should not overlook the cryptocurrency financial services landscape. On the contrary, it is a market they should pay more attention to, especially as it is well positioned to become one of the most attractive sectors for crypto VC investments in the coming years.
Why crypto Financial Services Deserve Much More
The relative lag in funding for the crypto-financial services sector this year can be attributed to several factors, which draw from the broader financial and technological landscape. Firstly, crypto financial services involve many rules and regulations, which can be difficult to understand. This area is closely watched by governments and agencies, making it a tightrope act compared to freer sectors like blockchain or nft gaming. Uncertainty over what new rules might come into play may make investors nervous.
Then there's the allure of the shiny new. It's easy to get excited about projects that allow people to trade digital art or play blockchain-based games. They're cool, they're making headlines, and they promise a whole new world of digital ownership and fun. Compared to these, the financial services sector may seem a bit old-fashioned.
But here's the thing: crypto financial services play a crucial role in the digital asset industry. In fact, they are the backbone that supports everything else in the world of cryptocurrencies. Without them, it would be difficult to buy, sell, or do anything with cryptocurrencies safely. This sector is all about ensuring that people can use their currencies without problems, offering essential services such as paying with digital assets, keeping them safe, and even helping businesses use cryptocurrencies.
Investing in this sector may not seem as glamorous as buying the next hot nft, but it has tremendous potential. As cryptocurrencies become integrated into everyday finances, their supporting services will be in greater demand. Despite its current funding status, it is a long-term bet.
Focus, don't overlook it
Investors and venture capitalists should keep an eye on the crypto financial services sector for several good reasons. First of all, as I mentioned above, it is the backbone of the digital asset world, including critical solutions like exchanges, payment products, and cryptocurrency management. As the cryptocurrency market grows, these services become more important and offer investors a solid opportunity.
Secondly, the rules around cryptocurrencies are starting to become more apparent. This development is good news because it makes the crypto financial services sector less risky and more attractive to investors. Companies that know how to work with these rules could do very well.
Third, big players are becoming interested in cryptocurrencies and large institutions are starting to gain exposure to this asset class through exchange-traded funds. Since institutional clients need financial services in this sector, this could translate into more business and growth for companies in this space.
Finally, there is a lot of room for new and innovative ideas in crypto financial services. Investors therefore have the opportunity to support companies that could disrupt traditional finance and grow.
Returning to the spotlight
To attract more investment, projects in the sector should demonstrate that they play by the rules. They must make it clear that they follow all the rules and keep their clients' assets safe. This makes investors feel more comfortable investing their money.
crypto financial services companies must also clearly explain what they do, why it is necessary, and how it can grow to help investors see the potential for big profits. At the same time, having a star team with experience in both finance and technology can make a significant difference. For investors, this shows that the company can handle the complex world of cryptocurrencies.
Additionally, crypto financial services companies that can work well with traditional financial and technology companies could have a better chance of success. It shows how serious they are and whether they can fit into the wider world of TradFi.
Focusing on these areas could make the crypto-financial services sector more attractive to investors, helping it grow and become an even more critical part of the financial industry.
A sector well positioned for future crypto VC funding
Given current trends and developments, cryptocurrency financial services are likely to attract more investments in the next two to three years.
One of the reasons why I am optimistic about the future of the sector is that more and more large companies want to enter the world of cryptocurrencies. They need secure and reliable services to help them achieve this, which could mean more business for digital asset finance companies.
Additionally, as the government clarifies the rules around cryptocurrencies, people will feel more comfortable investing in them. Therefore, it could bring more money to cryptocurrency financial services.
Improved technology is improving crypto financial services and attracting investors looking for innovative opportunities. Companies now offer crypto insurance, payments and loans, which could spur even more investments. The growing use of cryptocurrencies raises the need to support financial services, which could lead to greater investments in the sector.
With the involvement of large companies, clearer rules, better technology, more services, and growing adoption of cryptocurrencies, the financial services sector of the digital asset industry could become a hot spot for venture capital investments in the coming years. years.
