According to The Block, the landscape of cryptocurrency financing in 2023 is facing significant challenges, with total investments dropping to $10.6 billion, a sharp contrast to the $33.2 billion invested in 2022, marking a 68% decrease and the lowest point since 2020.
There are several factors contributing to this decline, including historically high interest rates, the rapid development of artificial intelligence diverting attention from cryptocurrencies, regulatory crackdowns, and the impact of high-profile cryptocurrency failures involving FTX, Celsius, and BlockFi.
The Block interviewed eight companies from the top 20 active cryptocurrency venture capital firms to discuss their perspectives on the cryptocurrency financing prospects for 2024. The interviewed companies generally hold an optimistic attitude and shared many noteworthy cryptocurrency tracks, such as projects combining AI technology and consumer-oriented use cases.
Coinbase Ventures: A Bright 2024
Coinbase’s venture capital division continued to invest in the challenging year of 2023 and maintains an increasingly optimistic outlook for the future. A spokesperson for Coinbase Ventures stated that they believe the convergence of several key factors lays the foundation for a bright outlook in 2024, including improved regulatory clarity (primarily outside the United States), matured protocol infrastructure, institutional participation, and innovative ways for users to participate in on-chain products. The spokesperson stated that the company expects its activities to grow in 2024. Coinbase Ventures will continue to invest in areas that can accelerate bringing the next billion users onto the blockchain, including cryptocurrency infrastructure and consumer applications like social networking and gaming, while also seeking opportunities in the intersection of artificial intelligence and cryptocurrencies. The company will also expand support for teams building the Base chain ecosystem through the Base Ecosystem Fund.
Galaxy Ventures: Challenging and Flat Landscape
Galaxy Ventures, the venture capital division of digital asset investment firm Galaxy, remains cautious but committed to investing in early-stage projects. Mike Giampapa, a general partner at Galaxy Ventures, stated that the limited partner community continues to overemphasize low liquidity investment projects, resulting in new capital entering the venture capital space facing more restrictions, and fundraising conditions continuing to be subdued due to high interest rates. However, Giampapa believes that the industry may see more consolidation, with large companies acquiring smaller ones. He also expects more investment in startups with sustainable business models that demonstrate product-market fit (PMF) in 2024, such as Blockspace and stablecoin products. Giampapa stated that in the stablecoin space, the market is in the early stages of transitioning towards on-chain asset tokenization, and B2B and B2C applications will integrate these new financial products into their existing offerings, with a new wave of infrastructure participants enabling developers to drive the adoption of such products.
Animoca Brands: Very Optimistic
Hong Kong-based Animoca Brands is “very optimistic” about the cryptocurrency market and expects a healthier cryptocurrency financing environment in 2024. Yat Siu, Co-founder and Chairman of Animoca Brands, stated that with the rebound of the cryptocurrency market, “momentum has shifted, potentially signaling the beginning of a new bull market cycle for cryptocurrencies.” Siu believes that games and the AI field, including elements of Web3, could attract more investment in 2024.
Shima Capital: We’re Still in the Early Stage of Cryptocurrencies
Shima Capital, a venture capital firm focused on early-stage cryptocurrency projects, maintains a “cautiously optimistic” approach to cryptocurrency financing in 2024. Alex Wettermann, Head of Shima Capital’s gaming division, expects more investment in vertical areas like infrastructure, gaming, and tokenization in the coming year. Wettermann stated that the company expects the infrastructure, gaming, and tokenization verticals to receive more investment in the next year.
HashKey Capital: Bullish on the Future Cryptocurrency Market
Xiao Xiao, an investment partner at HashKey Capital, an Asian venture capital firm, stated that HashKey Capital expects the next year to be a “bullish market.” Xiao mentioned that HashKey will actively seek new investment opportunities, including “liquidity investments.” The company also plans to expand its asset management business into new markets and launch diversified funds tailored to different investment preferences.
Multicoin Capital: Cryptocurrencies to Have “Huge Opportunity” in the AI Revolution
Kyle Samani and Tushar Jain, managing partners at Multicoin Capital, remain optimistic about the market development in 2024, particularly for the Solana ecosystem, which has shown recent performance based on that blockchain ecosystem. Samani also believes that cryptocurrencies will have a “huge opportunity” in the AI revolution. Samani stated, “Specifically, today there’s an acute shortage of GPUs, and the scramble for these resources will grow exponentially.” He added that cryptocurrency-supporting computational markets and professional cloud service providers have an opportunity to intervene and fill this gap. Tushar Jain expects a new wave of “neobanks, DeFi primitives, payment applications, on/off-ramps, and decentralized exchanges” to emerge in 2024 to fill the void left by centralized lending platforms and exchanges that closed in 2023. He stated, “These products will be far superior to earlier generations of DeFi projects, with user experiences comparable to custodial providers.”
Polygon Ventures: Bullish on Web3 Innovation and Adoption
Abhishek Saxena, CEO of Polygon Ventures, stated that Web3 financing has likely bottomed out, indicating that the new year will attract more investment. He mentioned a positive indicator that “even in a bear market, we’ve seen resilient developer activity, indicating that infrastructure is still being built.” Saxena expects financing for consumer-oriented use cases, including social, financial services, and entertainment, to rebound, potentially leading to new category leaders in these areas. He stated that tokenized verticals are also likely to attract more institutional investment in the coming year. “I am bullish on the acceleration of Web3’s innovation and adoption in 2024,” he added.
NGC Ventures: Bull Market to Fully Unfold
The three general partners of NGC Ventures, an Asian venture capital firm, maintain an optimistic outlook on the cryptocurrency market and venture capital for 2024. NGC’s Roger Lim stated that he prefers verticals such as AI and cryptocurrencies, Layer 2 for Bitcoin, modularity, and zero-knowledge technology. On the other hand, Wayne Zhu of NGC is focusing on “intent-based protocols” as they have the potential to improve user experiences, manage gas fees and slippage more efficiently, and increase composability to attract more users. Tony Gu of NGC is interested in decentralized physical infrastructure network (DePIN) and decentralized science (DeSci) as his key focus areas. Tony Gu stated, “Overall, NGC Ventures expects the bull market to fully unfold in 2024, though it is uncertain how long it will last.”
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