Cryptocurrency asset firms have put an estimated $2.7 billion into decentralized finance projects during 2022, a 190% surge from the total of the previous year. In comparison, investments for centralized finance have seen a decrease of 73% to $4.3 billion over the same period.

Despite the overall decrease in crypto funding from 2021’s $31.92 billion to $18.25 billion in 2022, the trend towards DeFi is evident. According to a report issued by CoinGecko on March 1, the data “could point to DeFi being the new high growth area of the crypto industry,” while the reduction in funding to CeFi may suggest it is reaching a saturation point.

When compared to 2020, the start of the last bull run, the near three-fold increase in DeFi funding amounts to a staggering 65-fold increase. CoinGecko’s report stated that the largest DeFi investment of the year was Luna Foundation Guard’s (LFG) $1 billion sale of LUNA tokens in February 2022, before the catastrophic collapse of Terra Luna Classic (LUNC) and TerraClassicUSD (USTC) in May.

Meanwhile, Uniswap and Lido Finance, both Ethereum-native decentralized exchanges raised $164 million and $94 million respectively. On the other hand, FTX and FTX US were the largest recipients of CeFi funding, having raised $800 million in January, accounting for 18.6% of all CeFi funding in 2022. Unfortunately, the crypto exchanges collapsed only 10 months later, filing for bankruptcy.

The report also noted that investments for blockchain infrastructure and blockchain technology companies were strong, remaining at $2.8 billion and $2.7 billion respectively over the five year period.

Henrik Andersson, the chief investment officer of Apollo Crypto, a Australia-based asset fund manager, revealed that his firm is looking at four specific sectors within crypto as of late. The first is “NFTfi,” which is a combination of DeFi and NFTs. The second and third are on-chain derivative platforms and decentralized stablecoins, which Andersson believes have come about due to the collapse of FTX and recent regulatory action. The fourth vertical he cited was Ethereum-based layer-2 networks.

Miles Deutscher, a cryptocurrency analyst, predicted in a tweet to his 301,700 followers last month that zero-knowledge rollup tokens, liquid staking derivative tokens, AI tokens, perpetual DEX tokens, “real yield” tokens, GambleFi tokens, decentralized stablecoins and Chinese coins would perform well in 2023, due to the heavy funding.

However, venture capital financing in the crypto space has decreased during the last three consecutive quarters, in light of the tough market conditions.