For players with a keen sense of smell in the crypto market, project financing in the market is an option that cannot be ignored. After many high-quality projects have received huge amounts of financing, they have attracted everyone's attention. During 20-21, many first-tier institutions have also emerged in the industry. It has become a trend to deploy early projects and obtain dividends of the times. The preferences of institutions and the market are the directions that ordinary people pay attention to, and may also be potential hotspots for the next bull market.
To this end, we have summarized the market financing projects from August 15, 2022 to March 5, 2023, and screened and counted the financing projects with a value of more than 10 million US dollars. Based on this, we have drawn up the institutional layout of the projects. The main statistical data are as follows:
From the above figure, we can find that there are relatively more projects related to blockchain games, web3 infrastructure, and NFT, relatively fewer open finance, cross-chain and layer2 chains, and 1 crypto asset custody. Public chains, payments, metaverse, on-chain data analysis, and wallets have also received relatively more financing times. Exchanges, insurance, and development tools have performed mediocrely.
Public opinion is not necessarily correct
Overall, surprisingly, gaming projects have become the largest category of institutional financing, and NFT has become the third largest category. DeFi, cross-chain, and exchanges have declined, while wallets, data analysis, etc. have gradually increased. From this, we can see that blockchain games may become one of the focuses of the next crypto bull market.
Contrary to the financing data, for a period of time at the end of 2022, the game was not favored by market opinion. The blockchain game market was relatively active in the first half of 2022, and in the second half of the year, due to market reasons, there were even some voices questioning blockchain games. However, the data results taught us a profound lesson, that is, the voice of public opinion is not necessarily correct.
The other is NFT-related projects. Although many people believe that NFT projects are extremely risky and often have projects running away, and the poor liquidity of NFT has also become the focus of everyone's attention, from the data point of view, NFT is still favored by capital. We believe that NFT is widely used and can be easily integrated with other project sectors, such as using NFT in DeFi or as props in chain games, and NFT can also have certain application scenarios in the fields of art and sports. The Web3 digital identity we mentioned actually has project parties planning to use NFT to solve it. The metaverse also has a close relationship with NFT, so the scenarios and uses of NFT actually have a high prospect. The main reason why many people are biased against NFT is actually the PFP avatar. It has to be admitted that the golden age of PFP avatars has begun to end. Real scenes such as art and music may be replaced by NFT in the future, so NFT deserves continued attention.
Infrastructure is still the main theme
Although blockchain has been developed for more than ten years, there is still room for growth in the underlying infrastructure technology. In the past, we thought that infrastructure refers to the underlying technology of the public chain, but as the development directions of blockchain become more and more, in fact, many directions have begun to have their own basic projects. For example, the rise of Web3 has caused many project parties to turn to serving Web3. At the same time, this has also become a focus of institutional attention. Some major blockchain infrastructures are also the favorites of institutions. If we merge the two types of infrastructure, then basic projects will be the main layout direction of institutions.
The attention paid to infrastructure also shows that the current development of blockchain is not mature. At the same time, basic projects also mean the ownership of the future discourse power, and there are also many opportunities behind this. Just like the institutions liked to invest in public chains before, the public chains bring about the development of the ecology. Similarly, infrastructure projects are also important tools to promote the ecology, which also makes basic projects popular.
Payment, Wallet and Data Analysis
What is surprising is data analysis. Before this, there were not many projects/companies related to data analysis on the chain. However, after this statistics, data analysis has also begun to attract the attention of institutions. From the current point of view, the probability of data analysis projects issuing coins is relatively small. The main reason is that data analysis is a direction derived from the blockchain industry. Its target groups are law enforcement agencies, encryption trading teams, and transaction-related project parties, security teams, etc., which means that data analysis is not decentralized.
So why are data analysis teams so popular? We think this is mainly due to on-chain regulatory factors. As we all know, on-chain security incidents have occurred frequently in recent years, and hacker theft has become commonplace, especially on-chain projects such as DeFi, which are nicknamed hacker ATMs by the public. Hackers need to consider how to deal with assets after illegally obtaining them, and law enforcement agencies also need to use data to find clues from the chain. Therefore, the market demand for on-chain data analysis has begun to increase, which has also become an important reason for institutional layout.
From 2017 to 2019, there was a view in the market that wallets were the entrance to the crypto world. However, with the shift in focus, the activity of many decentralized wallet teams has actually dropped significantly, and the number of decentralized wallets only meets the ecological needs of new chains. In this process, centralized wallets have also gradually come onto the stage.
The existence of centralized wallets is also due to supervision, especially custodians such as exchanges. The FUD of many projects and exchanges also makes the market sensitive to asset custody. Therefore, compliant asset custodians will become an important direction in the future.
Payment is similar to this. Cryptocurrency is naturally a payment property. In theory, it may not be realistic for institutions to deploy payment projects, but in fact, there are also pain points such as compliance. In other words, projects with low technical content in the circle can also be very disruptive if they are placed outside the circle. Payment is a typical case. At the same time, we can also learn from it that many projects can be favored by funds not because of how advanced their technology is or how powerful their innovation capabilities are, but in essence, it is the market demand + the support of top funds. Payment is a typical example. Of course, like the on-chain data analysis, we believe that centralized wallet teams and payment teams are basically unlikely to issue coins, and making traditional money may be their core.
What should we focus on?
Of course, more people may still pay more attention to what they should and should not pay attention to, and this is also the original intention of our data statistics for these projects. Here we summarize as follows:
Projects that may issue coins (native blockchain)
For payment, wallets, data analysis, crypto banks (no statistics), custody, development tools, etc., the possibility of issuing coins is relatively small. Here we need to realize that some teams/projects do not actually need to issue coins, and not all crypto-related teams need to issue coins. At least for now, many wallet projects have not issued coins. Therefore, we should pay less attention to such projects. Not issuing coins does not necessarily mean that the project/team has no profit channels. In fact, many projects in the circle have their own profit channels. Issuing coins may just be a bold attempt to comply with the decentralized spirit of Web3 and blockchain, or more bluntly, it may be the realization of value for the project to maintain operations. After all, developers also need to get wages. But then again, not issuing coins also means that it is difficult for us to obtain early dividends, so it is a wise choice to appropriately give up projects that do not issue coins.
Game NFTs and the Metaverse
We can consider game NFT and Metaverse projects as application layer projects. They are also closely integrated and can have a great impact on traditional industries or Web2 industries. At the same time, there are no unicorn projects in this direction or there are many project opportunities, which also represents the opportunity for the project to exist.
In addition, the prospects brought by game NFT metaverse projects are also very great. We cannot give up this direction just because of a bull-bear transition. The core of institutional layout of such projects is actually to subvert traditional projects. The mutual rollout within the circle may not be the original intention. At the same time, some people think that there may be a chance that the economic model mechanism of some projects such as NFT is not perfect. In fact, the improvement of the mechanism cannot be done in a short time. The imperfection also means that there is an opportunity. After it is perfected, it will be the same as the current public chain pattern. Layer1 will follow the lead of Ethereum, and other projects must be compatible with the EVM virtual machine. This also leads to a lack of opportunities.
Is Layer2 worth paying attention to?
Regarding layer2, we have also noticed that although there are many hot topics in the market about layer2, there are relatively few new layer2s invested by institutions. So is layer2 worth investing in? Here we need to be aware of the current market structure of layer2. Layer is still dominated by optimism and arbitrum, and there are not many other layer2s. On the contrary, there are also many projects that fork Ethereum to create their own chains. Layer2 is different from layer1 in that it uses zk zero-knowledge proof technology. Although there are relatively few layer2 chain projects, the general amount of financing is very high. In other words, the market does not need so many layer2s. The core reason why institutions would rather spend time investing in layer1 than in layer2 is that the market structure of layer2 is basically determined, and there are relatively few additional opportunities.
Optimism and arbitrum will most likely become the core of layer2 in the future, and many EVM-compatible public chains also have a certain market share. People initially mentioned layer2 because of the expansion factor. Layer1 was too congested, which led to an increase in gas fees. Now people mention layer2 more to see the impact of zk zero-knowledge proof technology, because the layer's handling fees may not be as high as everyone expected.
Another factor is that layer2 is still in the development stage, and there are not many strong technical teams. In other words, the small number of projects does not mean that institutions are not interested, but that there are few talents. Therefore, layer2 can also continue to be paid attention to.
Summarize
Institutions are not necessarily the smartest, but their funds can specify a direction for the market. Similarly, most of the institutions' investments also require returns. Although not 100% of institutional investments will generate returns, there is still a great chance of change. From this point of view, the probability of success by following institutions will also increase.
At the same time, a bear market is a good time to make plans. By collecting institutional layout data for about half a year, we can see that the number of financing projects with a total value of more than 10 million US dollars has exceeded 5 billion US dollars. That is to say, although the market is not enthusiastic, we still see those who have been prepared. The market is not lonely for these people, and there are still many opportunities in the industry waiting for everyone to discover.
