Review of Cryptocurrency Financing in the First Half of 2023: Primary Market Remains Cool, Infrastructure and Tools Leading the Way
Original Author: PANews, Zen
July quietly arrives, and more than half of this year has passed. Unlike last year when the market kept hitting new lows after entering the bear market, it has been a period of ups and downs, excitement and confusion for practitioners in the cryptocurrency and Web3 industries in the first half of 2023. The market sometimes boosts confidence, but sometimes seems to crush hope. From the narrative of LSDFi to the Shanghai upgrade, from the meme craze to Wall Street's entrance, amidst twists and turns and fluctuations, Bitcoin finally temporarily stabilizes above $30,000 in the middle of the year.
In the past six months, the AI sector has been flourishing in the field of technology, just like the blockchain industry received countless favors and massive investments one or two years ago. In this industry with uncertain development and a "monkey market" that jumps up and down in the market background, the blockchain primary market in the first half of the year was also difficult to stabilize. The financing situation in each month varied greatly, and even the performance of consecutive weeks could be quite different.
According to PANews statistics, there were a total of 689 investment and financing events in the first half of 2023, a decrease of 18.9% compared to the same period last year and a decrease of 14.7% compared to the second half of last year. The total financing amount exceeded $5.97 billion, a decrease of 74.3% compared to the same period last year and a decrease of 47.9% compared to the second half of last year. Among the financing events in the first half of the year, funds flowed into the infrastructure and tools track amounted to over $2.36 billion, accounting for 39.1%, with 209 financing events, accounting for 30.29%, both are the highest in various vertical fields.
Overview of Financing in the First Half of the Year
In the first half of the year, the activity in the primary market was essentially synchronized with the sentiment and enthusiasm in the secondary market, showing a strong positive correlation. At the beginning of the year, the cryptocurrency market fell to freezing point in a bear market trend, with less than 10 investment and financing events announced in a single week during the first two weeks of the year, and the total financing scale was below $50 million. However, as the industry recovered, a small bull market trend emerged from mid to late January until late April, and the primary market witnessed a significant rebound in activity, with all sectors experiencing the best market conditions in the first half of the year in April. According to data from the PA column "Financing Weekly" (link: https://www.panewslab.com/en/author/1646183767516160.html), during this period, an average of 30 financing events were announced per week, with an average financing scale of over $270 million per week.
It is worth mentioning that during the entire small bull market period, whenever there was a correction in the secondary market, the activity in the primary market would show a significant decline, although with a slight delay in response. For example, in a correction in early March this year, the price of Bitcoin dropped to around $20,000 again, and then started a sharp rally from March 12th, reaching above $28,000 by March 20th. However, the primary market during the same period was relatively bleak. According to the PA column "Financing Weekly" (link: https://www.panewslab.com/en/author/1646183767516160.html), only 22 investment and financing events were announced from March 13th to 19th, with a total funding scale of $110 million, much lower than the weekly average during the entire period.
In the first half of the year, the week with the most disclosed investment and financing events was from January 16th to January 22nd, with a total of 42 investment and financing events announced, with a total financing scale of 350 million US dollars. Among them, there were 22 events in the infrastructure, tools, and blockchain/Web3 application category. The week with the largest financing scale in a single week in the first half of the year was from March 20th to March 26th, with a total of more than 558 million US dollars and 26 investment and financing events. The decentralized finance sector exploded that week and received a total of over 320 million US dollars in financing. Among them, the multi-asset investment platform eToro alone raised 250 million US dollars in financing with a valuation of 3.5 billion US dollars. This financing is also the largest amount of funds obtained in a single financing event in the first half of this year.
The performance of each track is as follows:
DeFi: No decrease in the number of projects, fewer large financing cases
In the first half of the year, the DeFi track raised a financing scale of over 384 million US dollars, a year-on-year decrease of 60.5% and a month-on-month decrease of 38.8%; a total of 85 financing events were announced, a year-on-year decrease of 22% and a month-on-month increase of 11.8%. The financing scale of this track is mainly concentrated in below 10 million US dollars, accounting for 88%, which is the highest among all tracks. There were only 4 projects with a financing amount exceeding 20 million US dollars, accounting for about 4%. Among them, the project with the largest financing amount is EigenLabs, the developer of the centralized finance (DeFi) platform EigenLayer, which raised 50 million US dollars in a Series A financing led by Blockchain Capital. Other participating investors include Electric Capital, Polychain Capital, Coinbase Ventures, etc.
NFT & Metaverse: Entering a Deep Bear Market, Continuously Declining Popularity
In the first half of the year, the financing scale of NFT and Metaverse tracks exceeded $611 million, a year-on-year decrease of 80.6% and a month-on-month decrease of 50.4%; a total of 95 financing events were announced, a year-on-year decrease of 48.9% and a month-on-month decrease of 35.8%. Overall, since last year, both the scale and the number of projects in this track have shown a significant downward trend. However, looking only at the statistics for the first half of this year, the track showed stable growth from January to April, followed by a cliff-like decline, which is similar to the trend in other tracks. In the first half of this year, there were no projects in the NFT and Metaverse tracks that raised over $50 million in financing. There were 21 projects with financing amounts ranging from $10 million to $50 million, accounting for approximately 22%.
According to statistics, of the $610 million raised on the track, funds flowing into the metaverse field exceeded $325 million, accounting for approximately 53%. The largest single-scale funding was completed by the metaverse development company LandVault, with $37 million. The Sandbox, SoftBank, and Kingsway Capital led the investment, with participation from HodlCo, Gemini Frontier Fund, and others. The largest funding in the NFT sector was the Series A funding of digital collectibles platform Candy Digital. According to SEC filing documents, it raised more than $38 million through equity issuance from 14 investors.
Chain Gaming: Funding Plunge, Market Declines Significantly
In the first half of the year, the chain gaming track raised more than $470 million, a year-on-year decrease of 74.7% and a decrease of 70.3% on a month-to-month basis. A total of 86 financing events were announced, a year-on-year decrease of 41.1% and a decrease of 22.5% on a month-to-month basis. Chain gaming and gamefi are regarded as promising tracks by many industry insiders, and many research institutions consider them as the main direction for large-scale adoption of blockchain/Web3 technology. However, their market performance is not satisfactory, with significant differences in both inflow of funds and financing scale compared to last year, and the market experienced a sharp decline in the first half of this year.
Like NFT and the metaverse track, in the first half of this year, blockchain games also did not have any projects that raised over $50 million in funding. There were 18 projects that raised funding between $10 million and $50 million, accounting for about 21% of the total. The Icelandic game developer and publisher CCP Games raised the largest amount of funding, $40 million, with lead investment from Andreessen Horowitz (A16z) and participation from Makers Fund, Bitkraft, Kingsway Capital, Nexon, Hashed, among others. This funding will be used to create a AAA blockchain game based on their flagship game Eve Online.
Infrastructure & Tools: Leading the way in the long run
In the first half of the year, the infrastructure and tools track raised over $2.36 billion in funding, a 73% decrease year-on-year and a 37.3% decrease month-on-month. There were a total of 209 funding events announced, a 5% increase year-on-year and an 8% decrease month-on-month. Blockchain is still in its early stages, and infrastructure development and tool innovation may continue to be the industry's theme for a long time to come. As the leading vertical domain in the long run, there were a total of 51 funding events in the first half of the year with a scale of over $10 million, accounting for about 27% of the total. There were 10 projects that raised $50 million or more, accounting for about 5% of the total.
The project with the largest financing scale is the Islamic Coin, a compliant Islamic finance cryptocurrency project, which has received a $200 million investment from ABO Digital, a digital asset investment company, bringing the total funding received by the project to $400 million. In addition, the cross-chain interoperability protocol LayerZero Labs completed a $120 million Series B funding round at a valuation of $3 billion, with participation from a16z Crypto, Christie's auction house, Sequoia Capital, and others. Furthermore, Ledger, a hardware wallet manufacturer headquartered in Paris, has secured most of its target of $109 million in funding.
Centralized Finance: Highest Funding in the Tens of Millions
In the first half of the year, the financing scale in other centralized finance sectors exceeded $1.04 billion, a year-on-year decrease of 20% and a quarter-on-quarter decrease of 36.4%. A total of 152 financing events were announced, a year-on-year decrease of 48% and a quarter-on-quarter decrease of 30%. Decentralized finance remains the sector with the highest funding in the tens of millions, with 25 investment and financing events worth $10 million or more, accounting for nearly 40% of the total. Among them, there were 6 events with a scale of $50 million or more, accounting for nearly 10%.
In addition to eToro mentioned earlier, which raised $250 million in funding with a valuation of $3.5 billion, other projects that received large funding include: Salt, a cryptocurrency lending institution previously affected by FTX, completed a $64.4 million Series A financing; and Swiss digital asset company Taurus SA raised $65 million through equity financing, with Credit Suisse Group leading the investment and Deutsche Bank AG and Pictet Group participating.
Others: least affected by the bear market, or gradually implementing technological applications
This category mainly includes projects that integrate industries such as DAO, media, markets, social, education, mining, real estate, and carbon neutrality with blockchain and crypto technology. The total amount of funding in these application areas in the first half of the year exceeded $1.1 billion, a decrease of 20% compared to the same period last year and a decrease of 36.4% compared to the previous month; a total of 152 financing events were announced, an increase of 67% compared to the same period last year and a decrease of 4.4% compared to the previous month. Compared with last year, the number of projects receiving funding in this category only slightly decreased, with the lowest decrease in funding amount among the six sectors.
Projects in this category generally receive relatively small amounts of funding, with 125 financing events below $10 million, accounting for 82%. Chain Reaction, a blockchain chip startup based in Tel Aviv, raised $70 million, the largest funding in this track, with a lead investment from venture capital firm Morgan Creek Digital.
