The world of digital finance has seen a major shift in investments in recent years, with decentralized finance (DeFi) emerging as a clear winner in 2022. According to a report by CoinGecko, investment in DeFi projects skyrocketed by a staggering 190% in 2022, with digital asset investment firms pouring $2.7 billion into this sector alone. In contrast, investments in centralized finance (CeFi) projects plummeted by 73% over the same time period, with just $4.3 billion invested.
This trend is particularly striking given that overall crypto funding figures fell from $31.92 billion in 2021 to $18.25 billion in 2022, due to the market shifting from bull to bear. Despite this downturn, DeFi investment saw a near three-fold increase, potentially pointing to it as the new high-growth area for the crypto industry. The report also suggests that the decrease in funding towards CeFi could be an indicator that the sector has reached a degree of saturation.
According to CoinGecko’s report, the largest DeFi funding in 2022 came from Luna Foundation Guard’s (LFG) $1 billion sale of LUNA tokens in February. This was followed by Ethereum-native decentralized exchange (DEX) Uniswap, which raised $164 million, and Ethereum staking protocol Lido Finance, which raised $94 million.
Meanwhile, FTX and FTX US were the largest recipients of CeFi funding, having raised $800 million in January 2022, accounting for 18.6% of CeFi funding in that year alone. However, both crypto exchanges later collapsed and filed for bankruptcy just 10 months later.
The report also noted that blockchain infrastructure and blockchain technology companies raised $2.8 billion and $2.7 billion, respectively, making them other areas of significant investment. This trend has remained strong over the last five years, according to CoinGecko.
Henrik Andersson, the chief investment officer of Australia-based asset fund manager Apollo Crypto, says his firm is currently focusing on four specific sectors within crypto. The first is “NFTfi,” a combination of DeFi and NFTs that includes NFT projects using DeFi to implement various trading strategies to earn passive income, or long or short-trade NFT projects, among other things.
Overall, the rise of DeFi investment is a clear indication of the rapidly changing landscape of digital finance. As the market continues to evolve, it will be interesting to see how DeFi and CeFi continue to compete and evolve, and what other trends and innovations emerge in this exciting and ever-changing industry.