By Global Coin Research Team

Highlights

GCR is a research and investment community. As a collective, we source investments, conduct research and diligence, and make investments together.

This piece lays out some highlights from the past quarter:

• The GCR Community saw over 45 investment opportunities in Q3, of which 24, or ~53% came directly from community members and contributors.
• The only top category we invested in was once again Infrastructure.
• During Q3 2023, GCR invested in a total of 2 deals.
• GCR Core Team presents Q3 macro review and shares our outlook for Q4 2023.

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Robust Community-Driven Investing Despite Market Conditions

Q3 2023 Summary Stats

The GCR Community continues to make significant strides, demonstrating unwavering discipline in curating top-notch deal flow and forging partnerships with high-conviction companies.

• During Q3 2023, the community assessed 45 deals, notably lower than in Q2 2023 but still ample. Specifically, approximately 53% of these opportunities were directly contributed by community members and contributors. This figure contrasts with the 150+ investment opportunities observed in Q3 2022, where 40% were community-sourced.
• Q3 2023 saw the lowest volume of deal opportunities in 2023.
• When categorizing the opportunities explored by the community, Infrastructure and DeFi/CeFi remain the most prevalent at approximately 37% each, and Gaming and Social at around 26%.
• Furthermore, the community solely focused on investments in the Infrastructure category during this quarter, similar to Q2 2023 as well as Q3 last year.
• In alignment with the prevailing market sentiment and the discerning approach of the GCR Community, GCR executed only 2 deals in Q3 2023, a notable difference from the 7 deals invested in Q2 2022, but up from the 1 deal we executed in Q2 2023.

Every quarter, we proudly share our progress to showcase the capabilities of GCR’s community-led investment platform. The GCR Community continues to grow stronger as members educate each other about their specific areas of expertise. If you would like to learn more about how you can be involved with the GCR Community, join our Discord.

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Q3 Venture Investing at Lowest Since 2020

According to Galaxy Digital’s research, both capital deployed and total number of investments funded in Web3 saw their lowest stats this quarter since Q4 2020.

The bleak venture outlook is not just limited to the Web3 space. The US startup scene saw a big drop in venture capital funding from Q1 to Q3 of 2023. During this time, there were 5,448 VC investments made in the US worth $89.3 billion. This is a whopping 40.3% drop in the number of deals from last year, and the total money invested fell by 45.6%, based on data from GlobalData.

Looking at the year, the Web3 venture fundraising landscape continues to be demanding. As with the ongoing macro overhang, crypto and blockchain companies garnered fewer funding dollars over the past four quarters than they managed in Q1 2022 alone. Additionally, the total number of investments saw a new low this cycle with only 376 projects invested.

However, there are some signs of improvement on the horizon. Venture funds raised over $1bn in Q3 2023, marking the first rise since the downturn started in Q3 2022. The number of new fund launches saw a slight increase to 15, up from 12 in Q2. However, both median and average fund sizes have notably decreased from their peak during the bullish phase.

Anecdotally, at GCR, we’ve also seen numerous projects, including funds, that have struggled to raise in the past quarter. Nevertheless, enthusiasm coming from founders has not decreased.

We remain optimistic about both GCR’s prospects and the future of the crypto space. Specifically, after visiting and doing multiple partner events in Korea and Singapore in September, we continue to feel bullish about the international opportunities for crypto. We anticipate more crypto-friendly jurisdictions like Singapore and the United Arab Emirates will continue to foster an active builder environment for crypto.

Source: Galaxy Research

Doing a deep dive on the European side, the European Commission has stated that the concept of the digital Euro moves further to a “preparation phase”, which takes two years. This period will be used to set potential rules for the retail Central Bank Digital Currency. However, it is not set that it will be introduced.

Instead, topics regarding digital ID (eIDAS) are in discussion on the European level but also at national levels. Real-World Assets (RWAs) and Tokenization are still strong topics on the table, where projects and regulators work on sufficient guidelines. Since MiCA, the EU’s comprehensive new crypto regulation has been approved, detailed questions are arising, such as when a project is sufficiently decentralized and when it does fall under a certain national authority. That is to be worked out by the national authorities together, as discussed at the Berlin Conference by the German Authority (BaFinTech).

In the general European VC-Landscape, every quarter in 2023 saw an increase in deal activity, however, overall deal volume is still 49.1% lower than the past two years.

The temporary decrease of the European Blockchain space in terms of deal activity to the 4th place (with 11%) could be caused by the new adaptation of new regulatory standards. Simultaneously, the 3rd place in deal activity with 17% has been taken over by RegTech – which focuses on solving TradFi challenges regarding regulation.

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GCR Portfolio Companies Update

We have previously focused our quarterly reviews on highlighting our deal pipeline and funded investments, but since last quarter, we want to take the opportunity to showcase what some of our awesome portfolio companies have been building in the bear market.

GCR now has grown to over 70 portfolio companies that are relentlessly building, we are proud to be backers of these projects building the future of Web3.

Gearbox Protocol creates and collects rewards for on-chain contributions.

• Gearbox is close to V3 launch and planning the next steps for integrations!

Goldsky is a centralized data indexing tool. Web3’s real-time data platform.

• Goldsky proudly announces full indexing support for Linea Mainnet via Indexed.xyz. This empowers builders and researchers to freely explore Linea’s on-chain data, addressing Ethereum’s cost and scalability issues with faster, secure transactions. Linea seamlessly integrates with MetaMask and Truffle, enhancing accessibility to Ethereum and Web3 technology.

Intella X is a Web3 gaming platform that was started by Neowiz (a Korean gaming company) that partnered with Polygon, etc.

• Intella X has been making remarkable strides during the second quarter of 2023. This quarterly report highlights the significant achievements, product launches, game releases, external communications, and strategic partnerships that have been instrumental in shaping the course of Intella X’s journey. From the launch of a generous grant program to the introduction of innovative games and strategic collaborations.

Jia connects capital to small businesses in every corner of the world.

• In H1, Jia launched publicly and hit their targets to begin establishing themselves as a leading financial partner to SMEs. The team has originated $400k+ to 600+ borrowers in Kenya and the Philippines with a 92% repayment rate. Their customer obsession has paid off, leading to high conversion (65%), repeat (85%), and referral rates (55%).

LayerZero is a User Application (UA) configurable on-chain endpoint that runs a ULN.

• The Google Cloud oracle has just rolled out on LayerZero. What this means is that by default every message within LayerZero will leverage the secure infrastructure run by one of the most security-minded organizations in the entire world. Put another way, Google Cloud will verify the validity of every message within LayerZero by default.

Magic Eden

Magic Eden is the leading community-centric NFT marketplace.

• ME is introducing tokenized digital collectibles, a new way to collect on Magic Eden.
  

Morpho Labs

• Morpho Labs is advancing on multiple fronts; significant progress has been made in protocol and on-chain engineering. The team has navigated the CRV situation, ensuring smooth operations. The MetaMorpho code is continuously refined, incorporating valuable feedback from risk managers. Morpho’s AaveV3 Optimizer surpasses $300M in supplied volume.

Mural makes it easy to manage real-time payments and invoices for employees, contractors, and vendors worldwide.

• Mural is an instant global payments platform, with no transfer fees. The team now offers KYB/KYC, off-ramping, connected bank accounts, digital signatures, contact groups. With Utopia sunsetting their product last week, we are transitioning some of our off-chain/on-chain transactions to Mural with GCR and GCRx. Let us know if you’d like to be in touch and explore them.

prePO is a decentralized trading platform allowing anyone, anywhere to gain exposure to any pre-public asset.

• prePO is making strides in V2 development, tech enhancements, token innovation, community initiatives, and team expansion, as detailed in their recent community update.

Sweat Economy

• Sweat Wallet and $SWEAT have become available to US users in September! The Sweat Wallet is the No.1 Finance app in 25 countries! It is also Top 5 in Finance in 52 countries. Learn more about it here.

Talent Protocol is a social and economic platform where builders can share their goals and find the support they need to achieve them.

• BuilderFi, the project that garnered the most awards during ETH Singapore, continues to make waves in the crypto space. They have an eagerly anticipated alpha release on the horizon. Additionally, the Talent Protocol community is actively participating in a voting experiment, fostering collaboration and decision-making. In another development, Take Off Istanbul, an integral part of Talent Protocol, is gaining momentum. You can join the conversation and participate in these exciting developments by visiting the Talent Protocol website.

t2 is a decentralized social network around reading and writing.

• t2 has made significant strides in improving shipping speed, expanding their writers’ community by nearly 50%, and fostering seamless teamwork to address upcoming challenges. Interested parties can review their 2023 Strategic Plan for more details.

zkLink is a trustless chain-to-chain DEX based on zero-knowledge technology.

• zkLink Summer Tour exploration of the crypto landscape, featuring top platforms and valued ecosystem partners. Over five weeks on the Galxe platform, participants can earn rewards by completing various tasks and accumulating loyalty points. Designed to be accessible, educational, and rewarding. The tour is a perfect opportunity for anyone interested in diving into the cutting-edge world of DeFi.

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Global Macro Outlook

The cryptocurrency market experienced a further but gradual decline in Q3 2023, extending the downtrend that had begun in Q1 of the same year. The bearish sentiment seems to be primarily attributed to a significant decrease in trader interest seen by reduced trading volumes and volatility. However, the markets have not seen a tremendous downturn, since some trends have brought back ideas regarding SocialFi, such as Friend.tech and Telegram-connected bots for on-chain trading that have brought up new narratives.

Quo Vadis interest rates?

After consecutive months of raising interest rates all around the globe, it is expected that the Fed and other Central Banks will not be raising rates. Instead, the next move is expected by the Fed to be cutting rates next year, but still the premise is “higher for longer”. Supply concern for the upcoming winter in the northern hemisphere drives energy prices. Besides that, no major changes are expected for Q4.

SEC and the BTC-ETFs

While in the Q2 quarter, the news of large TradFi-players applying for Bitcoin and Ethereum Spot-ETFs led the market to await the approval, the SEC kept postponing the decision. The market expects the approval in Q1 2024 and, according to a Bloomberg analyst, that might push more institutional liquidity into BTC in a long-term perspective.

New Social Narratives

SocialFi Friend.tech has seen a vast inflow of activity, which is primarily used for trading, farming airdrops and less for socializing. It’s impressive that $20 million in protocol fees has been generated in less than 3 months with 3 employees. However, it has reinforced the trend of social apps but with a large purpose of just short-term profit and not expanding a social network with interactions. Telegram on the other hand has introduced Telegram bots that make the interaction with DApps more convenient, such as token sales.

Recap Q3 2023; BTC ETH Leads

Some highlights from the Coindesk Digital Asset Recap report:

• Over the past three months, Bitcoin (BTC) saw a drop of -10.9%, doing slightly better than the general trend, while Ether (ETH) experienced a sharper decrease at -12.5%. Looking at the year’s performance so far, Bitcoin has impressively surged by 64%, whereas Ether has climbed by 41%.
• The demand from institutions for Bitcoin ETFs consistently boosts BTC’s position, while ongoing regulatory challenges with alternate tokens lead to a split in the crypto market between key players like Bitcoin and Ether and other digital currencies and initiatives.
• A notable change this quarter in the crypto world is the reduced risk of the sector, as indicated by conventional metrics. The report notes less volatility, a diminished link with standard stocks, and a slightly lower connection among the top-30 tokens.
• Ripple’s court case win and enthusiasm for AI led to an outperformance of DeFi, Digitization and the Computing sector in September leading with ChainLink (LINK) to rise 24% for the month.

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Join Us

We continue to be excited about what lies ahead in the last quarter of 2023 for GCR and the rest of the crypto community.

If you are a startup raising capital and are interested in learning more about what it is like to have the support of a community with thousands of members, please reach out to one of our GCR Core Team Deal Leads!

If you are a Web3 enthusiast and are interested in learning about new crypto projects, investing alongside sophisticated members, and sharing investment opportunities, hop into our Discord and join the conversation.

As part of our effort to onboard the next one billion users to crypto, we are giving away complimentary 1-month Gold memberships to people who are aligned with GCR’s core values and are seriously interested in investing with us. If you are interested, please fill out this form here.

Please reach out if you have any questions, comments or feedback! We welcome the dialogue.

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[This article has been written and prepared by the GCR Team, a group of dedicated professionals with extensive knowledge and expertise in their field. Committed to staying current with industry developments and providing accurate and valuable information, GlobalCoinResearch.com is a trusted source for insightful news, research and analysis.]

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Disclaimer: Investing carries with it inherent risks, including but not limited to technical, operational and human errors, as well as platform failures. The content provided is purely for educational purposes and should not be considered as financial advice. The authors of this content are not professional or licensed financial advisors and the views expressed are their own and do not represent the opinions of any organization they may be affiliated with.