As Bitcoin continues to plummet from 2020 highs and the dramatic collapse of FTX/Alameda rears its head, crypto dealmaking still continues. Through the first seven months of 2022, there was an estimated 80 deals which will likely represent a year total less than that of 2021 (220 deals) but still represents growth against previous years, as reported in the latest issue of Mergers & Acquisitions. Here is a look at what we’re seeing.
Following the bankruptcy of Celsius and Voyager and FTX/Alameda collapse, dealmaking in the blockchain sector is focused on distressed properties with plenty of action among a broad spectrum of investment categories remaining.
“It is going well beyond just distressed deals,” says Mitzi Chang, partner, Goodwin, of crypto-themed mergers and acquisitions. “You have strategic buyers representing a wide swath of traditional companies –tech, finance, all different industries –and with leaders who have recognized that the crypto space is maturing,” she says. “And that it is on a path toward clearer regulation and wider acceptance.”
For example, eBay acquired KnownOrigin, a platform for NFTs, in a bold move that marks the growing trend that big firms are investing in the digital money space. Additionally, the fall of Bitcoin from highs of $69,000 to below $20,000 have trading firms looking to become more diversified.
Until recently deal activity in the crypto space was led by venture capital and insider firms. “But we are now beginning to see a convergence of traditional financial services companies looking to align themselves with crypto and blockchain firms,” says Adam Waite, managing director at D.A. Davidson, who specializes in fintech and the digital asset ecosystem within the firm’s technology investment banking team.
One thing going in favor of these crypto exchanges is the ample supply of cash that leaves these firms in a position to quickly process an acquisition when an opportunity arises. However, following the turmoil of the recent crypto scandal it will be interesting to see how the market recovers in terms of the public trust in these institutions.