The crypto funding landscape has grappled with significant challenges in 2023, seeing a significant 68% decline in total investments to $10.6 billion. This sharp decline contrasts sharply with the $33.2 billion total investment recorded in 2022 and represents the lowest point since 2020. Many factors contributed to this decline, including historically high interest rates, the rapid expansion of artificial intelligence that has shifted attention away from crypto, regulatory pressures, and the aftermath of notable crypto crashes involving FTX, Celsius, and BlockFi. What’s on the horizon for crypto finance in 2024? Some of the 20 most active crypto venture capital firms of all time, such as Coinbase, made statements. Here are the details…
Coinbase Ventures: “A bright 2024”
Crypto exchange Coinbase’s venture unit has continued to invest throughout a challenging 2023 and looks “increasingly optimistic” about the future. Coinbase Ventures spokesperson said:
Our view is that; The convergence of 1) increased regulatory clarity (primarily ex-US), 2) maturation of protocol infrastructure, 3) institutional buy-in, and 4) innovation in how users interact with on-chain products. Bright 2024. Our commitment is global and unwavering and we expect our business to grow in 2024.
Coinbase Ventures will continue to invest in areas that accelerate onboarding the next 1 billion users, including crypto infrastructure and consumer applications such as social and gaming, and also sees opportunities at the intersection of AI and crypto. The company will also seek to expand its support for teams building on the Base through the Base Ecosystem Fund.
Galaxy Ventures: A harsh and silent landscape
The venture arm of billionaire investor Mike Novogratz’s Galaxy remains cautious but committed to investing in early-stage projects. “We expect the crypto VC environment to remain challenging,” said Mike Giampapa, general partner at Galaxy Ventures. “Even successful businesses and startups will likely have to make sideways or downward increases.” he added. Giampapa said the limited partner community “continues to be over-indexed to illiquid investments,” so new capital entering the venture space is “more constrained” and the fundraising environment is expected to “remain muted as interest rates remain high.”
But according to Giampapa, there could be more consolidation in the industry as larger companies enter into merger and acquisition deals with smaller firms. Meanwhile, according to Giampapa, there will be more investment in sustainable business models and proven product market fit initiatives in 2024, such as blockchain and stablecoins. “Blockspace is a fascinating and still relatively new product that has adapted to the product market,” Giampapa said. “Consumers are willing to pay more per transaction when there is a network effect around the merchant’s blockchain due to the combination of applications and developer talent,” he said.
Animoca Brands: ‘Very optimistic’ for cryptocurrencies
Hong Kong-based Animoca Brands is “very optimistic” and expects a “significantly healthier” crypto funding environment in 2024, company co-founder and executive chairman Yat Siu said in a statement. With the crypto market recovering, “there is a shift in momentum and this could represent the beginning of a new bull cycle in the crypto market,” Siu said.
According to Siu, gaming and artificial intelligence with web3 components may attract more investments in 2024. “Web3 gaming is poised to accelerate, especially in Asia and the Middle East, and Europe is also showing great interest,” he said. “On the other hand, AI in games will create more engaging and responsive experiences by adding complexity and depth to non-player characters, as well as improving content creation and asset generation,” he added.
Apart from Coinbase, Animoca Brands Galaxy, what do other crypto companies say?
Early-stage investor Shima Capital remains “cautiously optimistic” about crypto financing in 2024, the company’s head of gaming Alex Wettermann said in a statement. He expects the infrastructure, gaming and tokenization sectors to receive more investment next year. Xiao Xiao, investment partner at HashKey Capital, said in a statement that the Asia-based crypto venture capital firm expects an “emerging market” next year. Xiao said HashKey will actively seek new investment opportunities, including “liquid investments.” The firm also plans to expand its asset management business into new markets and launch a variety of funds that cater to different investment preferences.
Multicoin Capital managing partners Kyle Samani and Tushar Jain remain optimistic for 2024, especially for the Solana ecosystem, given the recent trajectory of the blockchain ecosystem. Samani also sees a “huge opportunity” for crypto in the AI revolution. “There is a huge shortage of GPUs (graphics processing units), especially today, and competition for these resources will increase exponentially,” he said, adding that crypto-backed computing markets and specialized cloud providers have the opportunity to step in and fill the gap.
Apart from Coinbase, Galaxy, Polygon and NGC also made statements
Abhishek Saxena, chief executive of Polygon Ventures, said in a statement that “the bottom is likely to be expected for web3 financing” and suggested that the new year would attract more investments. “The resilient developer activity we see even in the bear market is a positive indicator and underscores that foundation building is continuing,” Saxena said. Three general partners at Asia-based NGC Ventures remain optimistic about the crypto market and VC funding in 2024.
Meanwhile, NGC’s Tony Gu said the focus is on two verticals: decentralized physical infrastructure networks (DePIN) and decentralized science (DeSci). “As a consumer-facing application layer, DePIN has the potential to increase mass adoption,” Gu said. “We have seen a few interesting DAOs (decentralized autonomous organizations) emerge with DeSci, but one particular area that has yet to be tapped, as far as we know, is decentralized efforts to fund open source projects. I think there are too many things. “There is huge potential there when combined with artificial intelligence, for example, with decentralized machine learning models,” he added.
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