VCs Wary As DeFi Funding Stalls But TradFi Integration Grows

HomeNews* Investors are showing reluctance to invest capital in decentralised finance (DeFi) projects, according to top venture capitalists (VCs).

• Developers believe DeFi is moving away from initial ideals, focusing more on merging with traditional finance.
• Institutions are directing funds toward Bitcoin ETFs and traditional assets rather than onchain investments.
• Industry leaders see the integration of DeFi technology with traditional finance as a positive outcome.
• Recent governance decisions include Arbitrum DAO extending its Gaming Council’s term through year-end. Venture capitalists and developers at a recent crypto conference stated that investor interest in funding DeFi projects remains low. The event took place during the last week of June, where discussions focused on the outlook for decentralised finance in the current market.

• Advertisement - Panelists, including Haseeb Qureshi of Dragonfly and Mike Dudas of 6th Man Ventures, explained that large institutions favor investments in Bitcoin exchange-traded funds (ETFs), stocks, and major industry firms over direct onchain assets. Qureshi stated: “Right now, the market’s telling you is [that] we don’t see growth potential onchain.” Dudas agreed, noting a lack of appetite for onchain risk from even top crypto founders.

The report also highlights that some venture firms are increasing their funding for projects blending crypto and traditional finance, with expectations to double fundraising totals this year to over $20 million. Rather than replacing existing financial systems, DeFi is increasingly being used as infrastructure for traditional financial activity. As Kain Warwick of Synthetix emphasized, “The more TradFi uses DeFi as their rails, the more accessible it is.”

Historical context suggests the DeFi space has evolved from a niche group of technical users to broader adoption, as noted by Andre Cronje, creator of Sonic (formerly Fantom) and Yearn. Warwick argued that open blockchain applications make it easier for new entrants compared to the traditional process of negotiating access with banks or financial institutions.

Recent DeFi governance updates include the Arbitrum DAO extending the Gaming Council’s term, Optimism Collective voting on changes to quorum requirements, and Aave DAO advancing toward its v3.4 upgrade.

Other industry activity includes the EthCC conference in Cannes, where Vlad Tenev of Robinhood made an appearance.

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