3Q2023 Market Review & Outlook
L2 Iterative Ventures (“L2IV”) is pleased to present you our 3Q2023 Market Review and Outlook report. As we navigate into the second half of 2023, L2IV remains staunchly optimistic about the trajectory of the broader crypto and digital assets ecosystem despite recent fluctuations. So, while asset valuations are stabilizing following volatility in 2022 and 2023, the underlying decentralized architecture and tooling continue maturing rapidly. The present moment - despite its challenges - offers a unique window of investment for both retail and institutions before the next expansionary cycle begins. Our conviction remains stronger than ever – decentralized infrastructure is the future rails for user interactions, both institutional and retail, in finance, advanced applications, and beyond. The building blocks are firmly in place for an open, permissionless digital economy.
Executive Summary
Macro Dynamics:
In 3Q 2023, crypto assets underwent a modest downturn but maintained a trajectory towards recovery amidst a climate of decelerating inflation and persistent interest rate hikes
Bitcoin and Ethereum continue to lead the market, demonstrating resilience that positions them to potentially catalyze the next upswing
Developer activity has shown a notable decoupling from market capitalization trends, reflecting a lag in recovery as firms restructure to adapt to the bear market’s pressures
Major Ecosystems:
The “Ethereum L2 Summer” marks a period of substantial growth and maturity for Layer 2 networks, with an upsurge in transactions and platform launches
The DeFi sector is navigating through sustained capital and user withdrawal, notwithstanding a gradual price recovery, with Total Value Locked (TVL) and Monthly Active Users (MAU) still below first-half peaks
The LSDFi sector has seen a notable 140%+ QoQ growth in TVL, forecasting continued expansion supported by the burgeoning staked ETH market and nascent penetration rates
SocialFi, GambleFi, and Trading Bots like Unibot and Banana have sparked interest in Q3, but their longevity in the market remains under scrutiny
Key Thematics:
Rollup technology is advancing, with Layer 3 solutions emerging to further scale Ethereum’s capabilities, and Rollup-as-a-Service (RaaS) drawing significant interest amidst fierce competition
Zero-Knowledge (ZK) applications are broadening, impacting fields from computation to privacy, promising more extensive use cases
The integration of cryptocurrencies with AI is forging a path for novel applications, with blockchain characteristics complementing AI's potential
Intent-based architectures are shaping the future of dApps, with active research suggesting significant enhancements in user experience and setting new industry standards
MEV-related research is tackling key issues like order flow auction efficiency, protocol decentralization, and resistance to censorship, with ongoing developments in proposer and builder commitment schemes
Full Report
To access a comprehensive analysis of L2IV’s findings, we kindly request you to download the full report from the link provided below.
About L2IV
L2 Iterative Ventures (“L2IV”) is the Web3 arm of L2 Capital Management, focusing on blockchain technologies, specifically in early-stage projects around zero-knowledge proof and modular, multi-chain Web3 infrastructures. Our globally distributed team across Silicon Valley and Asia incubates technical founders and provides them with resources to scale from ideation to category-defining companies.
We capitalize on the higher crypto adoption rate in emerging markets, deriving crucial insights to shape our infrastructure investments. Our investment focus predominantly lies in the pre-seed and seed stage, while also participating in Series A rounds as follow-ons. Our investment philosophy is reinforced by an in-house team of industry-leading zero-knowledge cryptography experts and computer scientists, which ensures rigorous technical foundations and cutting-edge research.
We provide a comprehensive platform for Web3 innovators, operating an array of engineering bootcamps, hackathons, and incubation programs in partnership with esteemed entities like Google GCP, Developer DAOs, University blockchain communities, and layer 1 protocol teams. As such, we aim to catalyze the growth of the Web3 ecosystem and accelerate mass adoption by empowering builders with the necessary financial, technical, and human capital.
If you are a builder with a passion for Web3 as we do, feel free to reach out to us!
Email: team@l2iterative.com
Twitter: https://twitter.com/l2iterative
Website:
https://www.l2iterative.com/
Telegram: https://t.me/+8uyDw7uz7iI4ZWIx
LinkedIn: https://www.linkedin.com/company/l2iv/
Disclaimer
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