Crypto M&A is slowing as its own kind of winter sets in
After a fast start to the year, crypto M&A dealmaking has hit its own kind of ‘winter’.
Earlier this month, one-click checkout company Bolt dropped plans to buy crypto and payment infrastructure company Wyre for $1.5 billion. The news came just more than three weeks after investment firm Galaxy Digital called off its proposed $1.2 billion acquisition of Palo Alto, California-based BitGo.
The abandoned deals — totaling about $2.7 billion — help illustrate what appears to be a cooling M&A landscape as the crypto industry tries to find its footing after hitting all-time highs last year.
According to Crunchbase data, M&A activity targeting VC-backed crypto startups hit an all-time high in the first quarter of the year when 16 were announced. However, the deal pace has slowed to barely a trickle, with just seven deals in the past nearly two full quarters.
Although the number of deals has dwindled to a trickle, there haven’t been many big deals either. Silvergate Bank’s $182 million purchase of the technology assets of blockchain-based payment network Diem — the stablecoin originally developed by Facebook engineers — is the biggest deal involving a VC-backed entity of the year.
Perhaps that shouldn’t come as a surprise given the current market conditions. All of the dealmaking announced in the first quarter came just weeks or months after Bitcoin and many cryptocurrencies hit all-time highs in November — with Bitcoin itself flirting with $68,000.
Since those heady days, Bitcoin has fallen more than 70% and has often traded below $19,000.
Just as investors have left the cryptocurrency market, some venture investors have also slowed down their investments in the sector. Investments in VC-backed crypto companies slowed in the first half of the year and look unlikely to reach last year’s high of nearly $19 billion.
M&A deals seem to have followed, as companies like Bolt and Galaxy Digital had second thoughts about the deals both companies announced in the second quarter with much fanfare before canceling them in the third quarter.
Looking for a deal
That’s not to say that deal flow will continue to slow or stop altogether – in fact, it could pick up.
It only makes sense for companies that announced deals early in the year to pull back as valuations around the crypto sector have fallen. These falls in valuations can bring in more buyers as companies and individuals look for a good deal.
FTX CEO Sam Bankman-Fried has shown he is more than ready to look for potential deals, saying in a recent interview with CNBC’s Squawk Box that the stock market giant has at least $1 billion to spend on acquisitions and bailouts.
FTX is the frontrunner to buy the assets of crypto lender Voyager Digital — which filed for bankruptcy in July — CoinDesk reported last week.
Crypto exchange giant Coinbase has also made its intentions clear in the space. During the company’s Q2 earnings call last month, Coinbase president and COO Emilie Choi said the company will continue to be active across both ventures and M&A — adding that these tools have helped the company access innovation in the crypto ecosystem.
“It’s an area that has helped us access the innovation that’s happening in the crypto ecosystem,” she said. “And we see crypto winters as flea markets. It’s often the best time for us to be greedy when others are scared.”
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Illustration: Dom Guzman
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