Crypto Funding Shifts From CeFi to DeFi: Money Moves After Major Collapses
• DeFi has become a popular investment choice for investors after multiple CeFi collapses in 2022.
• Crypto funding shifted from CeFi to DeFi with $2.7 billion of investments into the space, while overall crypto funding dropped from 2021 to 2022.
• There were seven DeFi protocol hacks in February, resulting in a net loss of $21 million.
Shift From CeFi To DeFi
The majority of the DeFi tokens in the top 100 traded in the red on the weekly charts due to a downturn in the broader financial market. The shift from CeFi to DeFi is evident as digital asset investment firms poured $2.7 billion into decentralized finance projects in 2022 — up 190% from 2021 — while investments into centralized finance projects went the other way — falling 73% to $4.3 billion in the same timeframe. Despite overall crypto funding figures falling from $31.92 billion in 2021 to $18.25 billion in 2022, this points to DeFi as being a high growth area for the crypto industry and could potentially point to CeFi reaching a degree of saturation.
DeFI Exploits And Protocol Hacks
February saw seven DeFi exploits resulting in a net loss of about $21 million and March has already recorded multiple exploits such as on Hedera’s mainnet, with Tenderfi being exploited but luckily having its funds returned by white hat hackers. Tornado Cash developers said that their new version will be more regulator friendly — allowing law enforcement to differentiate between legal and illegal transfers of funds.
Bearish Market For DEFI Tokens
The past week was bearish for most tokens within top 100 due to federal budget and Fed rate hikes, however it is still early days for many of these projects so there is still potential for growth if they can overcome any obstacles faced by them going forward..
DeFI protocols are aiming towards regulatory compliance which will help attract more investors and give them peace-of-mind knowing that their funds are safe and secure when investing or trading through these platforms. This would also help reassure law enforcement authorities that illicit activity will not pass through these platforms undetected or unchecked which could have implications on how tax laws are implemented globally when it comes to crypto investments/transactions..
Overall there is an indication that we may be seeing shifts away from traditional finance (CeFI) structures towards decentralised finance (DeFI) structures which are seen as being more efficient, secure, transparent and less costly than their traditional counterparts, however there are still risks involved with investing or trading through these platforms like any other form of investment/trading platform so it’s important for users/investors/traders alike do their own research before doing so .