Cryptofusions are keeping pace with 2021, despite market declines
The crypto has lost 70% of its total market value in 2022, with the price of Bitcoin and other major cryptocurrencies crashing by over 40% in just the last two months. The downward price action has not had any effect on the growth of the nascent industry.
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According to a report from Architect Partners published by Arcane Research, cryptocurrencies and acquisitions (M&A) agreements were in line with last year’s calculations. As of 31 June, there have been 92 agreements and it seems to end the year at 184, slightly higher than in 2021.
In the third quarter of 2022, this calculation may rise on the back of attractive agreements from crypto companies in need. In the first half of 2022, driven by a decline in the price of Bitcoin and other cryptocurrencies, the collapse of the Terra ecosystem, and the default or failure of large crypto-investment companies, large companies in the sector have called for bailouts from other companies in a better economic position.
FTX, Binance, Coinbase and other majors in the industry have taken advantage of buying companies that were once valued in billions of dollars for steep discounts. This trend will continue in the second half of this year.
Arcane Research noted the following about the Architect Partners reports and how the legacy of cryptocurrency growth points to maturation for the emerging industry:
(…) The report noted a strong growth in bridge transactions, ie transactions between legacy and crypto business. So far into 2022, 49% of all crypto-related M & As have been bridge transactions. This is a significant growth from 2021, where 28% of the agreements were transactions (…). In other words, older companies account for a larger share of M&A activity in the market, which reflects a long-term positive view of the industry (…).
Why Crypto continues to expand despite persistent bearish market trend
Looking at this growth in more detail, Architect Partners noted an impressive expansion of the crypto sector. The nascent industry registered a growth of -3% in the number of M&A agreements in 2019 and 2% in 2020 with 58 and 59 completed agreements, respectively.
The industry went through a multi-year bearish trend that set the price of major cryptocurrencies back by as much as 80%. In 2021, the trend experienced a shift of 180 degrees with a growth of 205%, and 180 agreements completed with a growth of 500% in terms of capital provided to the sector.
What changed from 2019 to 2021 and the current year? Probably the arrival of large crypto companies such as FTX, Binance and Coinbase, as mentioned. These players have learned from previous bear markets and seem ready to take advantage of the current downside trend to their advantage.
The report notes at least 8 acquisitions for Coinbase in the last 24 months. This number is closely followed by FTX with 6 acquisitions, and 5 from Gemini. Not surprisingly, crypto trading, stock exchange infrastructure, mining and data analysis have been the “most mature and probably most active” subsector in 2022.
Coinbase also leads as the most active investor in 2022 with over 50 investments along with Animoca Brands. Polygon, Solana, Sequoia Capital, Pantera Capital and others followed with 26 to 50 investments in the first half of 2022.
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Despite its M&A agreements, Coinbase is in a sector with the worst performance in the same period. Crypto investments and trading platforms recorded a loss of 79% during this time, while Bitcoin and Ethereum recorded a loss of 55% and 67% respectively.
