Cross-chain, ZK, NFT finance... Where did crypto VC money go in Q1?
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Cross-chain, ZK, NFT finance... Where did crypto VC money go in Q1?
After the public blockchain wars initiated by Alameda, Zhusu, Hashed, and DCG, despite increasingly negative market sentiment, cryptocurrency venture capital firms continue to actively expand across different sectors. Where exactly is this money flowing?
Navigating Web3 tides with focused insightsWritten by: Alphanonce intern
TechFlow is authorized to publish
Following the chain wars initiated by Alameda, Zhusu, Hashed, and DCG, despite increasingly negative market sentiment, cryptocurrency venture capital firms continue to actively expand across various sectors. Where exactly is this money flowing?
TL;DR
1. In Q1 2022, cryptocurrency venture capital firms invested $14 billion—equivalent to 50% of total investment capital in 2021.
2. Exchanges primarily invested in cross-chain projects and NFTFi.
3. Top-tier VCs favored options and ZK technologies.
4. Undeniably, both exchanges and leading VCs show strong interest in DAOs and gaming.
Crypto VCs are mainly divided into two types: exchange-affiliated venture arms and (top-tier) independent venture capital firms—each with distinct strategies.
Let’s first examine the strategy executed by exchange venture arms.
Among 31 DeFi projects, 5 were cross-chain (16%); among 16 NFT projects, 6 involved NFT financialization (38%).
Cross-Chain
Currently, the most discussed cross-chain bridges include:
LayerZero_Labs ($STG), MultichainOrg ($MULTI), SwimProtocol ($SWIM), Routerprotocol ($ROUTE), Symbiosis_fi ($SIS)
Except for $SIS, all have raised funds from various VCs, especially $STG, whose list of VC investors is overwhelmingly long.
VCs are not just smart money—they are also narrative creators. Between 2021–2022, SBF, Zhusu, Simon Seojoon Kim, and Barry Silbert backed $SOL, $AVAX, $LUNA, and $NEAR respectively, followed by the era of chain wars. In 2022, despite frequent hacks on cross-chain bridges, cross-chain remains the hottest theme among VCs.
NFT Price Discovery
This falls under the theme of NFT financialization. When we only trade NFTs themselves, real-time price discovery isn't critical. However, when NFTs integrate with DeFi, it becomes crucial.
Imagine a BAYC collateralized loan. Suppose the true value of a BAYC is 100 ETH, and BAYCs trade once per hour.
If a malicious actor sells a BAYC for 1 ETH, many BAYC holders using their NFTs as collateral could face massive liquidations. This illustrates why accurate price discovery is vital.
Now let’s look at the areas top-tier VCs are investing in.
Among 34 DeFi projects, 4 were options-focused (12%); among 40 infrastructure investments, 8 were privacy- or scalability-focused (20%).
DeFi Options
Why are options important? Because they enable active yield generation in DeFi, and derivative markets are larger than spot markets—even in traditional finance (TradFi).
Traditional DeFi protocols offer yield through their own governance tokens, which are minted by the protocol. In contrast, yield from options protocols comes from organic mechanisms, making it far more sustainable.
In equities, daily options volume in 2021 ($450 million) exceeded daily spot volume ($405 million). In crypto, Binance’s daily derivatives volume ($56 billion) surpasses its daily spot volume ($18 billion). On-chain options remain one of the most underserved markets in crypto.
Zero-Knowledge Proofs (ZK)
Nearly all infrastructure projects aim to make blockchains more private and scalable. For this, ZK technology is essential. zkEVM solutions are on the horizon—a breakthrough-level technological advancement—and naturally attract top-tier VCs.
Common Interests
Both exchange venture arms and top-tier VCs show shared interest in DAOs and gaming.
DAO Governance Tools: Nftychat (a Discord requiring MetaMask login) + ENS = the most intuitive DAO governance tool. For truly decentralized autonomous organizations, we need a Web3-native social platform.
Gaming: MaviaGame is one of the most watched game projects, having raised $8 million from Alameda, Binance Labs, and Mechanism Capital, and has successfully completed its land sale.
Disclaimer: None of the above constitutes financial advice.
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