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2024 Blockchain Industry Financing and Market Dynamics Research Report#

I. Report Overview#

2024 is a year of rapid development and adjustment in the blockchain industry. The financing market continues to evolve with technological innovation, market price fluctuations, and changes in the macroeconomic environment. Bitcoin and Ethereum reached historical highs in March 2024, followed by significant market volatility. Against this backdrop, venture capital (VC) financing activities have also shown a unique rhythm, reflecting a lag effect between market sentiment and investment decisions. By analyzing financing data and quarterly performance across different sectors, we can reveal investment trends, technological advancements, and future development potential in the blockchain industry.

II. Financing Data and Project Distribution Analysis#

As of September 5, 2024, a total of 395 disclosed blockchain financing projects have been reported, covering multiple sub-sectors including artificial intelligence (AI), decentralized finance (DeFi), blockchain gaming (GameFi), Layer 1, and Layer 2. The following table shows the distribution of total financing amounts and project numbers by category:

III. Quarterly Financing and Project Number Trends#

1. AI Projects: Continuous Growth, Broad Investment Prospects#

AI is a highlight of blockchain financing in 2024, with both financing amounts and project numbers showing a continuous growth trend. Specifically, the number of investors in the AI sector is gradually increasing, with financing rising from 89.87 million USD in Q1 to 175.10 million USD in Q3, and the number of projects increasing from 15 to 19. This growth trend reflects the immense potential of the deep integration of blockchain and AI technologies. Applications of AI in decentralized finance, automated smart contracts, and prediction markets have continuously enhanced VC's willingness to invest in this field. It is expected that AI will become a key driving force in the blockchain ecosystem, continuing to attract significant capital and resources.

2. DeFi Projects: Highest Market Share, But Slowing Growth Momentum#

DeFi projects dominate the blockchain financing market, accounting for 29% with a total financing of 89.505 million USD. However, from a quarterly trend perspective, the total financing amount and project numbers for DeFi peaked in Q1 and then gradually declined. The financing amount in Q1 was 34.874 million USD with 59 projects, while in Q3, the financing dropped to 22.030 million USD with 43 projects. The DeFi market experienced explosive growth from 2020 to 2023, but the data for 2024 indicates that VC investors are beginning to conduct more cautious evaluations of the business models and sustainability of DeFi projects. Nevertheless, DeFi remains one of the most mature application areas of blockchain technology, and may attract investment again through emerging technologies such as synthetic assets, decentralized insurance, and automated market making.

3. GameFi Projects: Early Prosperity, Q3 Decline#

GameFi showed strong performance at the beginning of 2024, with total financing amounts of 25.817 million USD and 18.440 million USD in Q1 and Q2, respectively, and project numbers of 36 and 44. However, entering Q3, the market heat for GameFi noticeably declined, with financing amounting to only 11.777 million USD and project numbers dropping to 20. This change reflects the high volatility of the blockchain gaming market. Although blockchain gaming has great potential in attracting users and capital, challenges in its business model (such as low user retention and sustainability issues) have made investors more cautious in Q3. The future performance of GameFi will depend on its ability to achieve stronger user engagement and innovative gaming economic systems.

4. Layer 1 Projects: Funding Peak in Q2, Significant Decline in Q3#

Layer 1 projects attracted substantial funding in Q2, with financing reaching 53.798 million USD, a significant increase from 16.600 million USD in Q1. However, in Q3, the financing amount plummeted to 1.250 million USD, and the number of projects decreased from 16 in Q2 to 2. As the infrastructure of blockchain technology, Layer 1 projects rely on large-scale technological innovation and ecosystem development. Therefore, the surge in Q2 financing may be related to the release of major projects or technological breakthroughs, while the significant decline in Q3 indicates that the market entered a period of observation and adjustment after major progress. The high entry barriers of Layer 1 technology lead to significant financing fluctuations, but in the long run, it remains a core driving force for the development of the blockchain industry.

5. Layer 2 Projects: Steady Development, Slowing Growth Rate#

The financing amount for Layer 2 projects gradually decreased after reaching 35.180 million USD in Q1, with financing amounts of 12.828 million USD and 6.910 million USD in Q2 and Q3, respectively. Although the number of projects remained relatively stable, the decline in financing scale indicates that the market demand for Layer 2 scalability solutions is gradually stabilizing. Layer 2 solutions aim to enhance the scalability and transaction efficiency of blockchain, making it one of the key technological directions in the blockchain industry today. Despite a decrease in financing in the short term, the practicality and importance of Layer 2 technology ensure its continued long-term development.

IV. Relationship Between Market Prices and Financing Trends#

In Q1 2024, the prices of Bitcoin and Ethereum reached historical highs of 73787.1 and 4049.66, respectively. However, contrary to market sentiment, VC financing activities were relatively conservative in Q1 and only welcomed large-scale investments in Q2. This phenomenon indicates that VC investment decisions often lag behind market sentiment, preferring to enter during market corrections rather than at market peaks. Specific analyses are as follows:

1. Lagging Nature of VC Investments

Bitcoin and Ethereum reached historical highs in Q1, but VCs did not invest heavily during this period; instead, they conducted substantial financing during the increased market volatility in Q2. This may be because VCs focus more on long-term value rather than short-term market fluctuations. The market volatility in Q2 provided more attractive project valuations, prompting VCs to increase their investment in that quarter.

2. Impact of Market Volatility on Financing Activities

In Q2, the prices of Bitcoin and Ethereum experienced significant fluctuations, falling from highs of 72799 and 3980 to lows of 56555 and 2791. In this market environment, investors paid more attention to the potential value of projects rather than market sentiment, especially in the Layer 1 and GameFi sectors, where substantial capital flowed in, demonstrating VCs' confidence in long-term technological breakthroughs and market potential.

3. Reasons for Reduced Financing in Q3

Market sentiment in Q3 was relatively subdued, with Bitcoin's price dropping to 55798 and Ethereum's price falling to 2353. Combined with financing data, the reduction in Q3 financing may be due to investors' cautious attitudes towards short-term market fluctuations. Project parties received substantial funding in Q2, and Q3 may be a phase for project construction and technological advancement, leading VCs to adopt a wait-and-see approach for further progress on these projects.

V. Future Outlook and Investment Recommendations#

1. Q4 Financing Outlook#

Looking ahead to Q4 2024, financing activities are expected to rebound, particularly in the AI, Layer 1, and Layer 2 sectors. As more project technological achievements are released and market sentiment gradually warms, VCs may increase their investments in blockchain infrastructure and innovative applications again. The combination of AI and blockchain will be a key focus for future investments, with AI-driven decentralized application scenarios (such as automated decision-making in smart contracts and decentralized prediction markets) continuing to attract significant capital. Layer 1 and Layer 2 projects will attract more long-term capital as blockchain scalability and performance improve, especially projects that secured financing in Q2 may showcase technological breakthroughs in Q4, further driving capital inflow. DeFi and GameFi may see a revival in Q4, particularly if DeFi can launch innovative products and GameFi can address key issues such as user retention, restoring market investment enthusiasm.

2. Investment Recommendations#

For VCs and investors, here are some future investment strategy recommendations:

• Focus on Technology Innovation-Driven Projects: The core value of blockchain lies in technological innovation, especially in underlying architectures (Layer 1 and Layer 2) and applications that combine with AI. Investors should pay special attention to projects with breakthrough technological capabilities and clear business models.
• Seize Opportunities Amid Market Volatility: Historical data shows that market volatility often provides VCs with opportunities to enter at lower prices. Investors can assess the valuations of high-potential projects during market downturns and achieve higher returns through strategic investments.
• Diversify Investment Portfolios: The technological paths in the blockchain industry are diverse, and investors should adopt diversified investment strategies covering multiple areas from AI to DeFi, Layer 1, and Layer 2, to spread risks and capture more market opportunities.

VI. Conclusion#

The financing and market trends of the blockchain industry in 2024 exhibit a dual characteristic of technology innovation-driven and market sentiment fluctuations. Although financing activities in Q3 decreased, this is merely a short-term adjustment period. With the acceleration of technological progress in Q4, financing activities are expected to become active again. In the future, innovations in the AI, Layer 1, and Layer 2 sectors will become hotspots for capital pursuit, and the revival of DeFi and GameFi is also expected to drive further industry development. VC investment behavior demonstrates long-term confidence in technology, enabling them to seize opportunities amid market fluctuations and achieve effective capital allocation.