Expect a Wave of M&A as Crypto Market Crashes, Says Analyst

John Todaro, a senior crypto and blockchain researcher at Needham & Company, said the continuous crash of the cryptocurrency market could lead to a wave of mergers and acquisitions in the second half of this year and into 2023.

He made the argument in a chat with Barron’s magazine on June 22. In his words:

Valuations for public crypto companies have fallen by about 70% this year. This means crypto companies are cheaper now than a year ago. This could present an opportunity for a traditional company to get their foot in the sector at a lower valuation than they could’ve six to nine months ago

Notably, traditional, non-crypto-native companies are active acquirers of crypto firms like Animoca Brands, a gaming investment company. Animoca holds portfolio investments worth $1.5 billion in crypto and blockchain gaming across 340 companies. In May, Cboe Global Markets completed its acquisition of Eris Digital Holdings (ErisX), a US-based digital asset spot market.

Todaro further proposed that much dealmaking will be crypto-to-crypto, and most acquisitive companies will likely be the exchanges. The most significant yet is the merger of Coincheck, a Japanese crypto exchange, with Thunder Bridge Capital Partners IV, valued at $1.75 billion.

FTX, a crypto exchange, recently agreed to buy Bitvo, a Canadian crypto exchange, while its US affiliate FTX acquired Embed Financial Technologies, a stock trading platform. FTX also signs a Landmark Term Sheet with BlockFi to provide a $250 Million credit facility.

According to Todaro, Binance.US has made eight acquisitions, while Kraken has also completed a dozen deals. Galaxy Digital Holdings, a crypto-focused financial services firm, has completed three acquisitions since its inception in 2018 and has a pending agreement for BitGo. The four transactions exceed $1 billion in value.