In the year 2022, virtual asset financial firms contributed more than $2.7 billion to decentralized finance projects.
Since 2021, the investments have climbed by 190, while investing in centralized finance projects has decreased by 73, resulting in a decrease of 4.3 billion dollars over the same period.
Even though total crypto financing dropped to $18.25 billion in 2022 from $31.92 billion in 2021 due to the market charts entering a full-blown bear run, the exponential growth of DeFi funding can still be seen.
According to the paper’s findings (1), the data demonstrate that the decentralized finance sector is the next elevated growth area for the cryptocurrency space.
In addition, the analysis indicated that there may have been an oversaturation of the market, which may have led to a decrease in centralized funding initiatives.
From 2020, the beginning of the bull run in the cryptocurrency market, there has been a nearly three-fold increase in investment in DeFi funds. This represents a tremendous 65-fold gain from 2020.
The Luna Foundation Guard’s (LFG) sale of one billion Luna tokens in February 2022 represented the most significant contribution to the enormous funding reserve accumulated by the DeFi community.
This decision was made three months before the ignominious collapse of Terra Luna Classic (LUNC) & TerraClassicUSD (USTC) in May.
Uniswap, an Ethereum-native decentralized exchange (DEX), has completed a Series B investment round that raised $165 Million. This round of funding was led by firms such as Polychain Capital, who invested in the company to help it expand its operations into new markets.
Another Ethereum staking mechanism, Lido Finance, also successfully raised $94 Million, with Andreessen Horowitz serving as the major investor.
On the flip hand, FTX and FTX US were the biggest beneficiaries of CeFi, raising $800 Million in January and contributing to 18.6% of the entire CeFi investment in 2022 alone. FTX and FTX US were the main recipients of CeFi.
Ten months later, the famed cryptocurrency exchange was forced to close its doors and file for bankruptcy.
Alternative locations of investments include blockchain networks as well as blockchain technology enterprises, which raised a combined total of $2.8 billion and $2.7 billion, respectively.
Which Web3 Initiatives Gatting Most Traction?
Henrik Andersson, Chief Investment Officer of Apollo Crypto, an asset fund manager located in Australia, identifies four primary subfields within the cryptocurrency market. These subfields are mining, exchanges, wallets, and exchanges.
The NFTfi is the first one, resulting from the merger of the NFT and the Defi. The decline of FTX and the most recent regulatory implementations have led to an increase in the use of on-chain option platforms & decentralized stablecoins, respectively.
Both of these have become increasingly popular in recent months. According to Andersson, the Ethereum-based layer-2 systems constitute the fourth sector of the industry.
Andersson continued by explaining that layer-2 tokens such as Optimism (OP) have demonstrated tremendous potential up until this point, particularly in relation to the testnet launch of “Base,” which was developed by Coinbase and is supported by Optimism.
Miles Deutscher, a crypto expert, had predicted in the past that zero-knowledge rollup coins, liquid staking derivative tokens, and perpetual DEX tokens would all function effectively in the year 2023 due to the substantial backing provided by funds.