Cryptocurrency Industry Financing Report 2023

In the years leading up to the bull market of 2021, the unique number of investors participating in funding rounds was relatively concentrated. As the industry matured, more and more investors have been seeking exposure in the field. In 2021 and early 2022, we witnessed incredible sums being disbursed to projects seeking investor funds due to the “only going up” price trend and low interest rates. It's evident that this era of

cryptocurrency

has come to an end, with the cumulative funding in 2023 only slightly higher than the levels seen in 2019 and 2020.

In terms of fundraising, companies like a16z, Paradigm, and Jump Crypto have been actively leading many notable rounds and distributing substantial amounts of cash from their seemingly bottomless pockets.

Looking at the track categorization, DeFi investments constitute 29% of the total funding in this period. Some larger DeFi investments include Li.Fi, M^ZERO, and Radiant. Additionally, gaming remains a popular category for venture capital, with most investments occurring in 2021 and 2022. However, it continues to be one of the most funded tracks in the cryptocurrency space to date.

Another category that has been popular for USD investments is Layer 1 blockchains. These corresponding tokens led the bull market of 2021, with some tokens achieving returns of up to 100x after launch. The graph below illustrates the funding situations for the eight largest Layer 1 blockchains from 2021 to 2023, with Near, Aptos, and Solana leading the way. Recently funded projects include Celestia and Sei, which have also made a mark, but the fundraising amounts for these projects are much lower compared to those launched during the bull market of 2021.

Financing Overview for 2023

The most popular funding round among investors is the seed round. Its popularity can be attributed to having the highest return on investment, as reliable products with a good market fit have repeatedly proven their valuation reaching astronomical figures, enough to convince investors that this is a viable investment strategy.

The market conditions in 2023 are not as favorable as in previous years, with liquidity being hard to come by, and investors being less willing to take on additional risks. Most projects typically secure funding in the range of 1 to 10 million USD, with only a few mature projects raising 50 million USD or more.

Projects in the infrastructure category, such as cross-chain bridges, Layer2, or privacy protocols, often secure more funding.

Despite not making it to the top of the list for the largest fundraisers this year, DeFi projects remain highly sought after by venture capital firms and private investors. Binance Labs, for example, is actively investing in DeFi and has funded projects like Pendle, Radiant, Helio, and more this year.