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Cryptocurrency startups have secured over $90 billion in funding through February 2024, with over 230 transactions and nearly $1.3 billion since the beginning of the year. Venture capitalists primarily funded decentralized finance, infrastructure, blockchain gaming, NFT, and Web3 projects.
However, only a small portion of the funds were allocated to crypto financial services in 2024. This is in sharp contrast to the 2021 bull market, especially when this sector accounted for a significant portion of VC investments.
Despite these recent trends, I believe investors should not overlook the state of crypto financial services. On the contrary, this is a market they should pay more attention to, especially since it could very well become one of the most attractive sectors for crypto VC investments in the coming years.
Why Cryptocurrency Financial Services Are More Valuable
The relative lag in funding in the crypto financial services sector this year can be attributed to several factors from the broader financial and technology landscape. First, there are many rules and regulations involved in crypto financial services, which can be difficult to understand. This field is closely monitored by governments and institutions, making it a bit risky compared to freewheeling fields such as blockchain gaming and NFTs. Uncertainty about what new rules will apply may make investors nervous.
And it has a new, shiny appeal. Projects that allow people to exchange digital art or play blockchain-based games are easy to get excited about. They're cool, they make headlines, and they promise a whole new world of digital ownership and fun. Compared to these, the financial services sector may seem a little outdated.
But the thing is, crypto financial services are playing an important role in the digital asset industry. In fact, they are the backbone that supports everything else in the cryptocurrency world. Without these, it will be difficult to buy, sell, or do anything with cryptocurrencies safely and securely. This sector is focused on enabling people to use coins without any problems, providing important services such as paying with digital assets, safe storage, and even helping businesses use cryptocurrencies. Masu.
Investing in this space may not seem as appealing as buying the next hot NFT, but it has great potential. As cryptocurrencies become more integrated into everyday finance, the demand for their support services will further increase. Despite the current funding situation, this is a long-term plan.
Stay focused and don't miss out
Investors and venture capitalists should monitor the crypto financial services sector for several good reasons. First, as I mentioned earlier, it is the backbone of the digital asset world, including important solutions such as exchanges, payment products, and cryptocurrency management. As the cryptocurrency market grows, these services will become more important and provide solid opportunities for investors.
Second, the rules surrounding cryptocurrencies are starting to become clearer. This development is good news as it reduces the risk of the crypto financial services sector and makes it more attractive to investors. Companies that know how to deal with these rules can do very well.
Third, major corporations are starting to take an interest in cryptocurrencies, and large institutions are beginning to gain exposure to this asset class through exchange-traded funds. Institutional investors require financial services in this area, which could lead to more business and growth for companies in this area.
Finally, there is a lot of room for new and innovative ideas in crypto financial services. Investors therefore have an opportunity to disrupt traditional finance and back companies with the potential to grow significantly.
Return to spotlight
In order to attract more investment, projects in this area need to demonstrate that they are acting as planned. You need to be clear that you are following all the rules and keeping your customers' assets safe. This gives investors more peace of mind when investing their money.
Crypto financial services companies also clearly explain what they do, why they need it, and how they can grow so investors understand the potential for big profits. There is a need. At the same time, having a rockstar team with both financial and technology expertise can make a huge difference. For investors, this shows the company can navigate the complex world of cryptocurrencies.
Additionally, crypto financial services companies that can work well with traditional financial and technology companies may have a better chance of success. It shows how serious they are and whether they can fit into the wider TradFi world.
Focusing on these areas could make the crypto financial services sector more attractive to investors, allowing the crypto financial services sector to grow and become an even more important part of the financial industry.
Sectors well-positioned for future crypto VC funding
Considering current trends and developments, crypto financial services are likely to attract even more investments in the next two to three years.
One of the reasons I'm optimistic about the future of this sector is that more and more large companies want to get into cryptocurrencies. A secure and reliable service is needed to support this, which could mean more business for digital asset finance companies.
Also, if the government clarifies the rules regarding virtual currencies, people will feel more confident investing in virtual currencies. Therefore, it has the potential to bring more funds to crypto financial services.
Improvements in technology are enhancing crypto financial services and attracting investors seeking innovative opportunities. Companies now offer cryptocurrency insurance, payments, and loans, which could encourage even more investment. The increased use of cryptocurrencies may increase the need to support financial services and lead to increased investment in the sector.
With the involvement of larger companies, clearer rules, better technology, more services, and growing adoption of cryptocurrencies, the financial services sector of the digital asset industry could become a hotspot for VC investment in the coming years There is a gender.
