Opinion: With Crypto VC Funding Rising, What’s Next In The Crypto Space?

By Edward, Managing Partner of HTX Ventures

The cryptocurrency market has grown significantly with several recent eventful milestones such as the approval of Bitcoin ETFs, the Bitcoin halving event, and Bitcoin reaching an all-time high, all in just the first quarter of 2024. With that, TradFi has started dipping its toes more into cryptocurrency through investments, partnerships, or even creating its own projects.

While the cryptocurrency scene is growing, crypto Venture Capitalists (VCs) such as HTX Ventures themselves are not lagging behind. VCs are quickly searching for and assessing the next potential project that addresses current issues and needs. But what are the next interesting projects that we can see VCs focusing on?

As HTX Ventures works closely with top tier vcs around the world, we observe the upcoming investment trends that VCs look out for in 2024 and 2025 revolve around four key areas: AI’s convergence with crypto, Decentralized Physical Infrastructure Networks (DePIN), new DeFi primitives, and economic security enhancements.

AI and Crypto Convergence

Artificial Intelligence (AI) has become integral to our daily lives and work routines. Within this transition, AI agents play a crucial role, providing professional assistance on specific tasks, such as trading bots. By integrating AI with blockchain technology, many existing pain points can be resolved. Blockchain can record actions and transactions made by AI agents, enhancing transparency in AI operations. Moreover, cryptocurrencies enable AI to autonomously execute tasks on behalf of humans without constant supervision, facilitating seamless payments through wallet tokens. One of the sampled projects that HTX Ventures has invested into is Theoriq, a platform for AI innovation based on composability, extensibility, and community-driven governance. For more AI + Crypto insights, read our newest AI in crypto research report.

Decentralized Physical Infrastructure Networks (DePIN)

DePINs are revolutionizing the blockchain landscape with their innovative use of existing infrastructure and data-centric business models. Unlike traditional IoT projects, DePINs leverage decentralized resources for efficient utilization. Current DePIN models focus on data storage, transmission, sharing, and usage. This approach not only enhances efficiency but also reduces costs, making DePINs a compelling investment. For a deeper dive, read our DePIN breakdown.

New DeFi Primitives

Innovative DeFi solutions, such as Influx, are emerging as new financial tools that allow users to leverage liquidity in novel ways. Influx, for instance, mitigates the risk of liquidation due to price fluctuations by implementing time-based liquidation. This allows traders to engage in leveraged trading of high-risk assets while offering sustainable higher yields compared to platforms like Uniswap. By earning both spot and perpetual trading fees, Influx serves as a foundational layer for various leveraged financial products, expanding the DeFi ecosystem’s size and scope.

Economic Security Enhancements

VCs are also investing in projects that enhance economic security, such as EigenLayer AVS, Shared Security by the Cosmos Hub, and BTC Staking by Babylon. These platforms offer additional rewards to users while bolstering the security of underlying layers, making them attractive investments.

In conclusion, while new projects continue to emerge, crypto VCs are constantly on the lookout for innovations that address real customer needs with exceptional products or services. With VC support, we are poised to witness the rise of new technologies and applications in the crypto space over the next few years. As these trends unfold, they will undoubtedly shape the future of the blockchain and cryptocurrency industries.