According to a report by 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 prominent cryptocurrency failures involving FTX, Celsius, and BlockFi.
The Block interviewed eight companies from the top 20 active cryptocurrency venture capital firms to discuss their outlook on cryptocurrency financing prospects in 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 Ventures, the investment arm of cryptocurrency exchange Coinbase, continues to invest in the challenging year of 2023 and holds an increasingly optimistic attitude towards 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 (especially outside of 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, consumer applications like social and gaming, and opportunities at the intersection of AI 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 arm of digital asset investment company 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 over-allocate to illiquid investment projects,” resulting in new capital entering the venture capital space being “more restricted,” and fundraising environment remaining “depressed due to high-interest rates.” However, Giampapa believes that more consolidation may occur in the industry, with larger companies acquiring smaller ones. He also expects more investment in startups with sustainable business models that have demonstrated 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 a long-term shift towards tokenizing on-chain assets, 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 the momentum has shifted with the rebound of the cryptocurrency market, which may indicate the beginning of a new bull market cycle. Siu believes that gaming and AI sectors incorporating Web3 elements may attract more investments in 2024.
Shima Capital: We are still in the early stages of cryptocurrencies
Shima Capital, a venture capital firm focused on early-stage cryptocurrency projects, maintains a “cautiously optimistic” outlook on cryptocurrency financing in 2024. Alex Wettermann, Head of Shima Capital’s gaming division, expects more investments in verticals such as infrastructure, gaming, and tokenization in the coming year.
HashKey Capital: Bullish on the future of the cryptocurrency market
Xiao Xiao, an investment partner at Asian venture capital firm HashKey Capital, believes that 2024 will be a “bullish market.” HashKey Capital plans to actively seek new investment opportunities, including “liquidity investments.” The company also intends to expand its asset management business into new markets and launch diversified funds tailored to different investment preferences.
Multicoin Capital: Cryptocurrencies will have “enormous opportunities” 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 performed well recently. Samani also believes that cryptocurrencies will have “enormous opportunities” in the AI revolution. He stated that there is currently a severe shortage of GPUs, and the competition for these resources will grow exponentially. Samani added that cryptocurrency-supporting compute markets and professional cloud service providers have the opportunity to intervene and fill this gap. Jain expects a wave of new neobanks, DeFi primitives, payment applications, fiat on-ramps, and decentralized exchanges to emerge in 2024, filling the gaps left by centralized lending platforms and exchanges that closed in 2023. He stated that these products will far surpass previous 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, believes that Web3 financing may have already bottomed out, indicating that the new year will attract more investments. He mentioned that “even in a bear market, we have seen resilient developer activity, indicating that infrastructure is still progressing.” Saxena expects a rebound in financing for consumer-oriented use cases, including social, financial services, and entertainment, with the emergence of new category leaders in these areas. He stated that tokenized verticals will also attract more institutional investments in the coming year, and he is optimistic about the acceleration of Web3 innovation and adoption in 2024.
NGC Ventures: Bull market to fully unfold
The three general partners at Asian venture capital firm NGC Ventures maintain an optimistic outlook on the cryptocurrency market and venture capital in 2024. Roger Lim of NGC prefers verticals such as AI and cryptocurrencies, Bitcoin Layer 2, modularity, and zero-knowledge technology. Wayne Zhu is focusing on “intent-based protocols” as they have the potential to improve user experience, manage gas fees and slippage more efficiently, and enhance composability to attract more users. Tony Gu is particularly interested in decentralized infrastructure networks (DePIN) and decentralized science (DeSci) as two verticals to watch. NGC Ventures overall expects the “bull market to fully unfold” in 2024, but the duration of the bull market remains uncertain.
