Crypto-based funding appears to be moving away from CeFi and into DeFi.

A crypto investment firm is currently paying close attention to “NFTfi,” on-chain derivatives, decentralised stable-coins and Ethereum L2s as potentially lucrative investments.

In the year 2022, decentralised finance projects saw a notable boom in investment from digital asset firms – with $2.7 billion pouring into them representing an astounding growth of 190% since 2021. Conversely, centralised finance projects experienced a sharp decline to just $4.3 billion after being invested in at $15.6 billion the previous year; a 73% reduction over that period of time.

Even though total crypto financing dropped drastically from $31.92 billion in 2021 to only $18.25 billion this year due to the bear market, DeFi funding still saw a remarkable surge.

An analysis conducted by CoinGecko, with data from Defi-Llama, suggests that DeFi may be the hottest sector within crypto. This is due to a decrease in investments into CeFi which could signify it has achieved a level of saturation. Thus the figures point towards DeFi as being an area ripe for growth potential.

This year, DeFi investments have skyrocketed by almost a factor of three, and compared to the beginning of 2020’s bull run – an unbelievable 65-fold increase!

CoinGecko reported that in February 2022 the Luna Foundation Guard (LFG) generated the biggest DeFi funding of $1 billion through its LUNA token sale, just three months before Terra Luna Classic and TerraClassicUSD suffered a fatal collapse in May.

Uniswap, an Ethereum-based decentralised exchange platform and Lido Finance, a staking protocol for the Ethereum blockchain network raised $164 million and $94 million respectively.

In January of 2022, FTX and FTX US were the largest beneficiaries of CeFi funding, raking in a staggering $800 million. This represented 18.6% of all CeFi funds that year! Unfortunately though, just 10 months later their luck ran out and they both declared bankruptcy.

Blockchain infrastructure and technology companies have observed a steady surge in investments over the last five years, with $2.8 billion and $2.7 billion being poured into such ventures respectively. This emphasises how blockchain is rapidly gaining traction in today’s market as more investors recognise its potential to revolutionise industry standards.

Henrik Andersson, the chief investment officer of Apollo Crypto, an Australia-based asset fund manager is focusing on four sectors within crypto recently.

His first suggestion is “NFTfi,” which combines DeFi and NFTs for a range of purposes. With these projects, you can generate passive income from trading strategies implemented in DeFi, or take on long-term or short-term investment opportunities with specific NFT ventures.

Andersson is of the opinion that two major post-FTX developments were on-chain derivative platforms and decentralised stable-coins, both regarded as products of regulatory action.

Andersson predicted that Ethereum-based layer-2 networks will be the highlight of 2023. “We’re expecting this to be a banner year for L2s, and in particular those built on top of Ethereum,” he stated emphatically.

The Chief Investment Officer expressed that Optimism (OP) tokens, falling under the ‘layer-2’ category, have displayed remarkable progress lately – particularly in reflection of Coinbase’s launch of “Base,” a testnet fuelled by Optimism.

Apollo Crypto invests in GMX, SNX, LYRA, LQTY and OP.

Last month, Miles Deutscher—a cryptocurrency analyst with 301.7K followers on Twitter—made a forecast that in 2023 various tokens will be propelled to new heights due to massive investments: zero-knowledge rollup tokens, liquid staking derivative tokens, AI (Artificial Intelligence) Tokens, perpetual DEX tokens, “real yield” coins and GambleFi technology among them. He also included Chinese coins into the mix as likely winners of this anticipated surge.

Despite the trying market conditions, venture capital funding for cryptocurrency ventures has unfortunately declined in each of the last three quarters.

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