Barbarians on the blockchain: a comprehensive review of crypto M&A

Since 2013 there has been over 350 M&A deals in the cryptocurrency industry totaling $4 billion according to a new report from TokenData Research. M&A activity in the industry tends to be positively correlated with cryptocurrency prices and sentiment with M&A activity peaking in 2018. Deal activity has slowed considerably since 2018 from about 160 deals announced to an estimated 90 to 100 announced in 2019.

Notably there has been a significant drop in larger deals (over $100 million). 2018 saw 5 deals over $100 million with the largest being Circle’s $400 million acquisition of cryptocurrency exchange Poloniex (which it recently spun out), the largest cryptocurrency acquisition of all time. 2019 has only seen one deal eclipse the $100 million mark, with Kraken’s $100 million acquisition of regulatuated derivatives platform Cryptofacilities. However that number could bump up to 2 if Coinbase’s rumored $140 million acquisition of Tagomi is does indeed announce.

Coinbase has been the most acquisitive company in the industry acquiring over 16 companies since 2013. Similar to the industry at large, The company’s M&A strategy has largely consisted of Acquihires and technology “tuck ins”; however, it has also engaged in two significant acquisitions such as Earn ($100 million) and Xapo’s custody business ($55 million). Exchanges have been some of the most prolific acquirers in the space, having the necessary cash positions to do so given their financial success facilitating speculation.

2019 also saw the first token merger. In April 2019, Singapore-based crypto exchange COSS and crypto wallet ARAX announced they would merge. As part of the merger the projects’ respective token holders swapped their tokens for new tokens of the merged entity. However, despite the deal being the first token merger, the transaction was not pure “decentralized M&A” given both tokens were very early stage and entirely driven by their founding organizations. In this light, the acquisition was not entirely unique as their have been numerous acquisitions relating to development teams building decentralized protocols. These teams engage in M&A in pursuit of things such as development acceleration, customer expansion, and protocol commercialization.

Why it matters:

• Deal activity in early stage industries could be a sign a consolidating industry or an industry struggling to find product market fit. Furthermore, while many focus on venture and token investment as barometer of industry health and signal of industry focus, looking at company M&A is also enlightening as it incorporates information from operators in the space. Operators can provide unique insights into where they see value as the builders in crypto.
• The long theorized token merger happened for the first time in 2019. Despite the deflated token values post 2017 bubble and crash, token values remain elevated. There are still over 75 token projects with market capitalizations greater than $50 million, potentially providing these projects with valuable acquisition currency. Furthermore there are numerous token projects trading below the value of their treasury potentially serving as valuable acquisition targets.
  

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