The M&A Crypto Consolidation Phase Has Arrived

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With Fidelity and Bakkt bringing crypto to Wall Street, likely boosting the future of digital assets and crypto asset trading even further, there’s another under-reported story that’s brewing in 2018.

Merger and acquisition activity for cryptocurrency companies has more than doubled in the past year according to JMP Securities and data from PitchBook.

With major crypto companies — such as Chinese mining hardware companies like Bitmain — thinking of going IPO, a rise in crypto funds is simultaneously occurring with more M&A activity. Functionally the industry appears to be in a “land grab” for innovative technology, access to new markets, intellectual property, and talented employees through M&A. The talent wars are on even as Wall Street Millennials pivot increasingly into blockchain and crypto.

Curiously, as in the case of Bitmain, Tencent and Softbank both denied being involved in a pre-IPO fundraising for Bitmain. Meanwhile, in the bizarre world of crypto, the value of altcoins (tokens) associated with startups appears to be more correlated to bitcoin (BTC’s price) rather than the actual value of the startups themselves.

According to JMP Securities’ Satya Bajpai:

As soon as a company becomes interesting, they get bought — the deal size may still remain small, but the number of deals will increase because that’s the most viable and fastest way to grow in this environment.

Even Coinbase and Binance have stepped up their acquisition game which means they may even be pondering a 2019 or 2020 IPO. While Binance denies this, a Coinbase 2020 IPO is more likely. With Facebook saying they are looking into blockchain, you never know what could happen.

Either way, 2018 has seen a marked uptake in merger and acquisition activity by cryptocurrency companies among themselves and by companies hunting for bitcoin-underlying technology, which is hitting record levels. The future of digital assets is looking very promising and a significant rise in crypto funds also demonstrates how fundraising in the space is pivoting from ICOs (that are now considered risky) to more traditional VC avenues.

As the landscape of crypto regulation arrives, and even as Bitcoin has lost half of its value in 2018, the total blockchain and crypto-related deals have surged more than 200 per cent at an annualized rate this year, according to data from PitchBook that was compiled by JMP Securities. That’s roughly equal to the increase in crypto hedge funds as we have seen in 2018 in a very important formative year for the future of blockchain.

As of October 15th, 2018, 115 deals involving cryptocurrency or blockchain had been announced, on pace to hit 145 by the end of 2018. The count is up significantly from the 47 total deals completed last year. Even as Bitcoin’s price has stabilized closer to $6,500 less volatility has actually meant more institutional opt-in.

With digital assets, it’s also a global shift in investing and of blockchain adoption, where the majority of the M&A transactions are “relatively small” at less than $100 million. You cannot say crypto is experiencing a “crypto winter” in conditions like these. If anything, there’s huge momentum and consolidation in the space to kickstart a highly exciting 2019 for the future of cryptocurrencies.

The talent pool of global top software developers with experience in Blockchain is limited. This being the case, blockchain engineers are hard to come by, and it’s even harder to find employees with both business and technical backgrounds — M&As in many cases are more about the talent than the products they bring with them.

Bitmain is on target for $10 Billion in revenue in 2018. Clearly there are going to be some big winners here. With a future of the likes of Fidelity, Bakkt and Circle, bigger name financial players will begin an increase in trading and investing in Bitcoin and her sister altcoins, giving way to a new era of investing that Millennials may be more inclined and feel more included to take part in.

It’s clear that 2018 will be an important year of legitimacy and consolation in the history of cryptocurrencies. Venture capital crypto funds, M&As and IPOs are expected to become even more commonplace in 2019, as crypto continues its regulatory sweep of the world as new kinds of digital assets emerge and public blockchains themselves continue to evolve and scale.

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