35 'Death' Crypto VC Projects 'Autopsy' Report: Over $1.10 billion in Funding, Highest Failure Rates in DeFi, NFTs, and Gaming

On July 30, Starknet ecosystem derivative DEX ZKX announced it would cease operations due to severe financial imbalance, which led to community scrutiny and condemnation. It's worth noting that just over a month ago, the protocol had officially announced a strategic funding of $7.60 million. In fact, due to tightening capital, liquidity risks, and industry downturns, the survival index of crypto projects has skyrocketed, even those previously favored by capital. According to a CoinGecko report earlier this year, since 2024, there have been 14,039 'dead' cryptocurrencies, exceeding 50%, with most projects appearing during the bull market from 2020 to 2021. During the last bull market alone, about 70% of the 11,000 crypto projects ceased operations. This article by PANews compiles 35 projects that have been 'out' since last year, each with funding over $5 million, including those once hotly pursued by well-known capital or backed by giants, mainly involving NFTs, DeFi, and gaming sectors. Among these shutdown projects, there are fading veterans and suddenly collapsed newcomers, most of whom ended due to financial issues, market downturns, regulatory pressures, and low product adoption rates. Although the crypto market has moved towards a capital 'controlled' stage, relying solely on funding does not mean successfully navigating through the bubble cycle. According to incomplete statistics by PANews, since 2023, there have been 35 crypto projects with funding over $5 million that have shut down, with a total funding amount of nearly $1.17 billion and an average amount of about $34 million. The top three funded projects were Voice, Prime Trust, and LINE NFT, collectively receiving over $600 million in funding.

DEFI

HONEY

On July 30, after the Starknet ecosystem derivative DEX ZKX claimed to stop operating due to severe imbalance between income and expenses, it faced community questioning and condemnation. It is worth noting that the protocol had announced receiving a strategic financing of 7.60 million dollars just over a month ago. In fact, facing multiple challenges such as tight funding, liquidity risks, and industry downturn, the survival index of crypto projects has sharply increased, even those once favored and bet on by capital. According to CoinGecko's report at the beginning of this year, since 2024, there have been 14,039 cryptocurrencies that have 'died,' with a proportion exceeding 50%, and most projects appeared during the bull market period from 2020 to 2021. Just in the last bull market period, about 70% of the approximately 11 thousand crypto projects had ceased operations. This article compiled by PANews lists 35 projects that have raised over 5 million dollars and have 'exited' since last year. Among them are projects that were once highly sought after by well-known capital or backed by giants, mainly involving NFTs, DeFi, and gaming. In these closed projects, there are veterans on the decline and newcomers falling suddenly, with most heading towards the end due to financial issues, market downturn, regulatory pressure, and low product adoption rates. Although the crypto market has entered a stage of capital 'control,' relying solely on financing does not mean a smooth passage through the bubble cycle. According to incomplete statistics from PANews, since 2023, 35 projects that raised over 5 million dollars have closed, with a total financing amount of nearly 1.17 billion dollars, averaging about 34 million dollars. Among them, the top three projects in terms of financing are Voice, Prime Trust, and LINE NFT, which together received over 600 million dollars in financing. 'When the trend is at its peak, the post-mortem begins.' Although there are many successful cases of navigating industry risks, the investment market is so cruel. Looking at the sectors to which these failed projects belong, DeFi, NFT, and gaming are at the forefront, the main narrative of capital investment. The proportion of failed projects in these three major sectors is 22.8%, 11.4%, and 8.5%, with investment amounts of approximately 170 million dollars, 530 million dollars, and 35 million dollars, accounting for about 62.8% of the total financing amount of closed projects. Behind these high financing amounts are many star VCs, such as Coinbase Ventures, Paradigm, Binance Labs, Sequoia China, Circle Ventures, Galaxy Digital, a16z, Polychain, and the bankrupt Alameda Research and Three Arrows Capital, among others. Coinbase Ventures, Alameda Research, Three Arrows Capital, and Polychain are particularly prone to 'stepping on landmines,' having invested in at least three failed projects, which is also closely related to their high-frequency investment activities. Furthermore, in terms of the timeline of establishment, projects launched between 2020 and 2021 have the highest failure rate, accounting for about 61.7% of the total statistics, with a total financing of over 430 million dollars. Among them, 16 failed projects are all from 2021, mainly in DeFi and NFT projects. In the rapidly changing crypto market environment, these cases of project failures undoubtedly sound the alarm for the industry. Overall, the vast majority of projects are related to market downturns, financial difficulties, stricter regulations, and insufficient product penetration. The industry's prosperity is a crucial factor affecting the survival and development of projects, especially under the 'cold winter' environment, successfully 'surviving' has become a challenge for major projects. According to PANews statistics, at least five projects had to cease operations due to market conditions. Take the NFT market as an example, it is well known that after the hype subsides, the NFT market continues to show a downward trend, with market demand becoming increasingly sluggish. According to recent reports from data tracking platform CryptoSlam, the monthly sales volume of the current NFT market has dropped to 393 million dollars, marking the lowest monthly sales volume since November 2023. Under such a significant contraction in trading, the NFT market inevitably experiences a wave of closures, even with many having strong backgrounds and substantial financing. For instance, the NFT market LINE NFT under the Japanese communication giant LINE, despite receiving about 150 million dollars in high financing, terminated its services after only two years of operation; NAEMO Market under Bithumb Meta, backed by Bithumb, also ceased operations due to continuous losses since its establishment, leading to investments from several large Korean companies including LG subsidiary LG CNS, CJ subsidiary CJ OliveNetworks, and SK Group investment company SK Square affiliate Dreamus, totaling about 7.30 million dollars, turning into nothing; and the NFT brand experience platform Recur, which raised 55 million dollars in financing, also closed after over two years of operation due to unforeseen challenges in the NFT market and changes in the business landscape. Although financing can alleviate to some extent the 'blockage' in project survival and development, the lack of a viable and sustainable survival mode makes it difficult to obtain continuous survival space. According to PANews statistics, at least seven projects closed due to expected returns not covering expenses or even exceeding financing funds. For example, ZKX raised a total of a whopping 12.10 million dollars in two rounds of financing but still chose to stop operating due to the inability to find an economically viable path. According to its founder, the decision to cease operations was based on several key factors, including extremely low user engagement, TGE not meeting expectations, the platform's revenue almost unable to cover salaries and other basic operating costs, and the current token value unable to sustain the protocol.This situation is related to the current resistance of retail investors to VC coins. In fact, the massive unlocking pressure has caused VC coins to gradually lose popularity in this bull market, making this investment background a 'invisible shackle' that restricts the development of encrypted projects. The same problem also appears in the liquidity staking platform ClayStack. After more than 3 years of continuous operation, over 6 product audits, and a seed round financing of up to 5.20 million USD, this platform announced a gradual shutdown in May this year due to lack of resources and insufficient product-market fit. The cross-chain liquidity aggregation protocol Via Protocol, which received 1.20 million USD in financing, also chose to terminate cooperation due to the inability to afford server costs. Financial difficulties have significantly eroded the project's value, even facing the risk of closure. In these failed projects, 5 projects are facing survival difficulties due to financial issues. For example, Jet Protocol, which received 11.60 million USD in financing from Paradigm and others, DAO creation platform Superdao, and blockchain gaming project Ascenders have all faced financial difficulties and chosen to close. Additionally, regulatory compliance is a major challenge that encrypted projects are facing. As the size of the encrypted market continues to grow, global regulatory hammers frequently strike, and the regulatory requirements are becoming increasingly stringent, putting pressure on related projects for regulatory scrutiny. At least 5 projects have closed due to regulatory factors. For example, the privacy protocol Nocturne, established in 2023, decided to gradually close in June after receiving 6 million USD support from investors such as Bain Capital Crypto, Polychain, Bankless Ventures, Hack VC, Robot Ventures, and Vitalik Buterin, following the regulatory pressure that led to the cessation of operations of a privacy protocol established earlier last year. Similarly, the encrypted investment app Pillow, after receiving 21 million USD in financing, was forced to be engulfed in the tide of encrypted history due to regulatory uncertainty. Of course, some projects have also closed due to core team disappearance, hacker attacks, investment defaults, and other black swan events. Among these 35 closed projects, many have closed without warning, with some token issuance projects causing significant losses to investors. For example, the metaverse game ecosystem DeHorizon and the metaverse project Pax.world have not issued any announcements, and the tokens have almost returned to zero or have not even been listed on centralized exchanges. It is worth mentioning that despite closing for different reasons, compared to projects that rug directly, some actively closed projects have provided positive post-closure solutions, such as ZKX liquidating all market positions and returning all funds to each user's trading account, and LINE NFT returning all on-sale assets after closure.

35 'Death' Cryptocurrency VC Projects 'Autopsy' Report: Totaling Over $1.10 Billion in Funding, DeFi, NFT, and Gaming Have the Highest Failure Rates