【Binance Research In-Depth Analysis③】 Fundraising Information in 2023, Institutional Investors' Activities, 8 Areas of Focus in 2024, and Overall Impressions and Observations
Good morning.
I'm Mitsui, a web3 researcher.
Continuing from yesterday, I will explain the report "Full-Year 2023 & Themes for 2024" announced by Binance Research.
Part 1: Market Trends of Cryptocurrencies, L1, and L2 in 2023
Part 2: Market Trends of DeFi, Stablecoins, NFTs, GameFi, and SocialFi in 2023
Part 3: Funding Information and Institutional Investors' Movements in 2023, 8 Focus Areas for 2024, and Overall Impressions and Analysis
This article is Part 3.
Table of Contents
1. Funding Information and Institutional Investors' Movements in 2023
-Funding Information
-Institutional Investors' Movements
2. 8 Focus Areas for 2024
-Bitcoin narrative remains at the forefront
-Further traction of ownership economy applications
-Integration with AI advances
-Increase in RWA (Real World Assets)
-Increase in on-chain liquidity
-Accelerated adoption by institutional investors
-Security remains crucial
-Importance of account abstraction
3. Overall Impressions and Analysis
Funding Information and Institutional Investor Trends in 2023
◼️ Funding Information
In 2023, investments from venture capital significantly decreased.
The total funding raised by the top 10 projects in 2022 was $5.87 billion, but it decreased to $1.78 billion in 2023, marking a 70% decrease.
Even the project with the lowest funding amount among the top 10 projects in 2022 secured more funding than the project with the lowest funding amount among the top 10 projects in 2023, surpassing the project with the lowest funding amount in 2022.
In 2020 and 2021, CeFi was the main investment target, but from 2022 to the first half of 2023, the spotlight shifted to infrastructure projects. It became clear that the infrastructure sector remained the most attractive for VC interest by the end of 2023.
Throughout 2023, web3 projects raised a total of 1,173 investments, with a total capital of $9 billion.
Of these, 36.5% was invested in infrastructure projects, followed by 13.3% in CeFi and 8.6% in DeFi. DAO had the least investment amount, accounting for a mere 0.47% of the total investment.
Top Fund invested in a total of 247 projects in 2023. These investments are primarily focused on infrastructure, DeFi, and gaming, accounting for 35%, 23%, and 11% of all transactions, respectively.
Although the investment amount and overall valuation decreased significantly in 2023, there are signs of market recovery, and it is expected that significant capital will be allocated to infrastructure development, which is essential for the mass adoption of blockchain and cryptocurrencies.
◼️Institutional Investor Movement
Over the past year, the awareness of the crypto industry has significantly increased, gradually attracting attention from the general public.
Web2 giants have intensified their entry into web3. Several pioneering companies have taken the lead and actively incorporated blockchain technology.
Microsoft reportedly tested an Ethereum-based Web3 wallet integrated into its Edge browser in March, and Alibaba Cloud, the cloud computing department of Alibaba, developed a metaverse launchpad called Cloudverse on the Avalanche network. Other companies such as Amazon, Visa, Ubisoft, and IBM have also entered the space.
Traditional finance institutions and government agencies have also been exploring the potential use cases of blockchain technology and cryptocurrencies.
In 2023, more than 10 financial institutions applied for Bitcoin ETFs, and as of January 10, 2024, the U.S. Securities and Exchange Commission approved the first batch of applications for spot Bitcoin ETFs.
Cross-chain interoperability solutions have emerged as an important area with significant potential for institutional adoption, especially with the increasing experimentation by various traditional finance institutions. Solutions like Axelar, Layer0, and CCIP have emerged.
In 2024, with the rise in market sentiment, increased institutional investor inflow, and upcoming events like Bitcoin Halving, it is believed that the adoption of cryptocurrencies will accelerate.
8 Areas of Focus in 2024
① Bitcoin Narrative Remains at the Forefront
Throughout 2023, Bitcoin remained the focus, driven by various narratives such as Oracles/BRC-20s, approval of spot Bitcoin ETFs, and the upcoming halving in 2024.
The recently approved spot ETF has the potential to introduce substantial liquidity into the crypto market and signifies Bitcoin's recognition as a legitimate asset.
These dynamics are expected to continue towards 2024.
Historically, the crypto market has shown strong performance in the year following halving events.
If Bitcoin prices surge in response to these events, smaller-cap assets like Oracles and BRC-20s, which have meme coin-like characteristics, may experience even more dramatic price fluctuations.
The introduction of Bitcoin scaling solutions like Stacks' sBTC will be particularly noteworthy as it contributes to the enhancement of Bitcoin's capabilities.
② Expansion of Ownership Economy Applications
Two notable areas of focus are decentralized physical network infrastructure (DePin) and decentralized social media (DeSoc).
The concepts of DePin and DeSoc have been around for some time but have gained significant attention in 2023.
This shift can be attributed to the maturity of infrastructure development, increased awareness, and the expansion of the crypto user base.
In 2024, both DePin and DeSoc projects are expected to be adopted at an accelerated pace, leading to potential growth and market penetration.
③ Integration with AI Advances
The integration of AI into the crypto ecosystem is still in its early stages but has the potential to widen the scope of potential use cases and provide alternative solutions to existing ones.
Projects incorporating AI already offer services such as automated trading, predictive analytics, generative art, data analysis, and DAO operations.
Decentralized training of AI models can achieve higher transparency and security.
④ Rise of RWA
It is expected that RWA will benefit from the tailwinds of rising interest rates in 2024.
Tokenized government bonds, in particular, are likely to remain attractive sources of alternative yields for crypto investors.
As institutional adoption of RWA accelerates, the development of related infrastructure such as decentralized ID, oracles, and interoperability solutions is also expected to gain momentum.
⑤ Increase in On-Chain Liquidity
The expansion of on-chain liquidity and the scale of financial activities are anticipated.
Two notable categories are liquidity management and Request for Quote (RFQ) systems.
RFQ systems represented by projects like Uniswap X, CoW Swap, and 1inch Fusion facilitate matching between traders and market makers using mechanisms such as Dutch auctions to ensure competitive pricing.
As on-chain trading infrastructure advances, the adoption of this efficient model is expected to increase.
⑥ Accelerated Institutional Investor Adoption
Institutional investor participation was observed in 2023, and it is expected that more institutional investors will enter the crypto space.
With the upcoming Bitcoin halving and positive headlines surrounding spot Bitcoin ETF applications, it is anticipated that media coverage of the crypto industry will increase in 2024.
⑦ Security Remains Paramount
Security plays the most crucial role in building and maintaining user trust in the crypto industry and maximizing its potential.
According to DeFiLlama data, over $1 billion was lost due to DeFi exploits in 2023. Although this is a significant improvement compared to the approximately $3.28 billion hacked in 2022, the amount lost is still substantial.
Considering the importance of security, it is expected that this area will continue to receive significant focus in 2024.
⑧ Importance of Account Abstraction
To onboard the next billion users and accelerate the adoption of blockchain, accessibility and inclusivity are key.
Account abstraction improves user-friendliness and facilitates the creation of smart contract wallets with features like social recovery, significantly enhancing the overall user experience.
Given the intense competition among wallet providers, it is not surprising that rapid development to further reduce friction when using web3 wallets is expected.
Overall Impressions and Reflections
So, how was it?
Over the course of three articles, we have summarized the content of the reports published by Binance Research. Reading and digesting this report myself has provided a good opportunity to gain a more comprehensive understanding of the overall sentiment in the web3 market. All three articles are interesting, so if you haven't read them yet, please take a look!
![[Binance Research In-Depth Analysis ①] Market Trends for Cryptocurrencies, L1, and L2 in 2023](https://substackcdn.com/image/fetch/$s_!SiDJ!,w_140,h_140,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd1abef9c-8e2b-4a7a-bba9-99816643fbf4_3760x2480.png)
![[Binance Research In-Depth Analysis ②] Market Trends for DeFi, Stablecoins, NFTs, GameFi, and SocialFi in 2023](https://substackcdn.com/image/fetch/$s_!it24!,w_140,h_140,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fe1958dba-9f3a-49b9-8b83-f2177f08e20e_3760x2480.png)
As an overall impression, I felt that the major development in 2023 was the expansion of the Bitcoin ecosystem. And I believe that this momentum will continue into 2024.
In a recent research report, I summarized the BRC-20, and the Bitcoin market turned out to be bigger and more exciting than expected. Currently, it is still experiencing a meme coin-like excitement, but I have a feeling that in 2024, there will be technological innovations like DeFi and the birth of a full-fledged Bitcoin ecosystem.
Another thing I am personally looking forward to in 2024 is "AA." Resolving the wallet problem is essential for the mass adoption of any application. In 2023, AA adoption has been gradually increasing, but it has not yet become a practical and popular choice. If these technological innovations and refined user experience progress in 2024, it will become easier to create products that can use web3 without conscious effort. So, I am excited about this area.
That's all for the explanation report of "Full-Year 2023 & Themes for 2024" by Binance Research!
Reference & Image Source: "Full-Year 2023 & Themes for 2024"
Disclaimer：I carefully examine and write the information that I research, but since it is personally operated and there are many parts with English sources, there may be some paraphrasing or incorrect information. Please understand. Also, there may be introductions of Dapps, NFTs, and tokens in the articles, but there is absolutely no solicitation purpose. Please purchase and use them at your own risk.
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Author
mitsui
A web3 researcher. Operating the newsletter "web3 Research" delivered in five languages around the world.
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The author is a web3 researcher based in Japan. If you have a project that is interested in expanding to Japan, please contact the following:
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*Please note that this newsletter translates articles that are originally in Japanese. There may be translation mistakes such as mistranslations or paraphrasing, so please understand in advance.