After large crashes, crypto financing shifts from CeFi to DeFi

After large crashes, crypto financing shifts from CeFi to DeFi
After large crashes, crypto financing shifts from CeFi to DeFi

Once the market went bear, worldwide crypto financing expectations dropped from $31.92 billion in 2021 to $18.25 billion in 2022.

In 2022, digital asset investment companies poured $2.7 billion into decentralized finance initiatives, increasing 190% from 2021, while investments in centralized finance projects fell 73% to $4.3 billion over the same year.

Despite global crypto financing estimates declining from $31.92 billion in 2021 to $18.25 billion in 2022 as the market switched from bull to bear, DeFi funding increased exponentially.

In line with a March 1 study using DefiLlama statistics, the results “could point to DeFi as the next high-growth sector for the cryptocurrency industry.”

According to the research, the decline in investment for CeFi may indicate that the industry has “reached a level of saturation.”

After large crashes, crypto financing shifts from CeFi to DeFi
Funding amount by sector in the cryptocurrency market between 2018-2022. Source: CoinGecko

In 2022, digital asset investment companies poured $2.7 billion into decentralized finance initiatives, increasing 190% from 2021, while investments in centralized finance projects fell 73% to $4.3 billion over the same year.

Despite global crypto financing estimates declining from $31.92 billion in 2021 to $18.25 billion in 2022 as the market switched from bull to bear, DeFi funding increased exponentially.

In line with a March 1 study using DefiLlama statistics, the results “could point to DeFi as the next high-growth sector for the cryptocurrency industry.”

According to the research, the decline in investment in CeFi may indicate that the industry has “reached a level of saturation.”

Henrik Andersson, the chief investment officer of Australia-based asset fund manager Apollo Crypto, has said that his company is focusing on four distinct crypto sectors.

The first is “NFTfi,” which, according to him, is the consequence of combining DeFi with NFTs.

Among other things, there are NFT projects that employ DeFi to execute different trading techniques to make passive revenue, as well as long- or short-trade NFT enterprises.

Andersson argues that the demise of FTX and current regulatory action have resulted in the emergence of on-chain derivative platforms and decentralized stablecoins:

“In the light of the FTX debacle and regulatory movements, we have seen renewed interest for on-chain derivatives platforms, such as GMX, SNX and LYRA. All seeing record volume/TVL.Decentralised stablecoins such as LUSD/LQTY has also gained from the current regulatory environment.”

Layer-2 networks based on Ethereum were the fourth vertical that Andersson mentioned.”2023 will be the year of L2s, namely Ethereum L2s,” he stated.

The chief investment officer stated that layer-2 tokens like as Optimism (OP) have done well recently, especially in light of the debut of the testnet version of “Base,” which was produced by Coinbase and is powered by Optimism.

Apollo Crypto’s investments include GMX, SNX, LQTY, LYRA, and OP.

In a Feb. 19 tweet to his 301,700 followers, cryptocurrency analyst Miles Deutscher predicted that zero-knowledge rollup tokens, liquid staking derivative tokens, artificial intelligence (AI) tokens, perpetual DEX tokens, “real yield” tokens, GambleFi tokens, decentralized stablecoins, and Chinese coins would perform well in 2023 due to heavy funding.

Despite this, venture capital financing in the crypto field has declined for three straight quarters due to difficult market circumstances.


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