Steady Growth in Digital Market Space
The digital market space has continued to see a steady pace of deals and investments in spite of the downward trend in 2023. According to Binance Research’s latest report, a significant portion of this sustained growth has come from gaming and infrastructure projects. Traditional VC shares have surged to 45% since the beginning of the year, and the report found that the gap between traditional and Web3 investors has gradually narrowed.
Investors Are Drawn Towards Gaming Industry
During the bullish market conditions of 2021 and early 2022, total funding consistently increased, peaking in April 2022 at $6.8 billion. However, there was a significant decline in funding between the second and third quarters of 2022, with only $2.4 billion of total capital invested in Q3. According to Binance Research’s analysis, funding levels have stabilized. Additionally, there was an increase in the number of deal funds in January and February 2023, primarily driven by growth in the Infrastructure and Gaming sectors.
Over the last four quarters, the gaming category received the highest amount of funding with 87 deals. Although gaming claimed the highest cumulative funding, it recorded the smallest average investment per deal, amounting to $7.42 million. This indicates that investors perceive potential in the gaming industry, but investment amounts remain conservative due to the nascent stages of Web3 gaming development.
Coinbase Ventures Tops as Non-Lead Investor
Binance Research’s findings reveal that prominent VC firms such as Pantera Capital, Dragonfly, Coinbase Ventures, a16z, and Polychain Capital frequently engage in co-investments. Polychain Capital and Coinbase Ventures stand out with the highest number of joint investments, totaling 40, which can be attributed, in part, to the fact that Olaf Carlson-Wee, the founder of Polychain, was Coinbase’s first employee and former Head of Risk.
Coinbase Ventures has consistently led deal counts over the past four quarters, allocating 33.3% to DeFi and 39.2% to infrastructure. In contrast, other investors, such as a16z, prefer larger lead investments in a more selective number of projects.
Hot Take: Digital Market Space Continues to Innovate
Despite a downward trend in 2023, the digital market space has continued to grow steadily thanks to sustained investments, particularly in the gaming and infrastructure sectors. This indicates a strong forecast for the expansion of the gaming industry and a rise in funding for AI and Data in recent quarters. With the shift towards areas of interest such as DEX, it’s clear that the digital market space continues to innovate and evolve.
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