Four charts on crypto M&A and funding
- It's a bull market in cryptocurrency right now.
- Money is pouring into crypto as strategic acquisitions are increasing in frequency.
To bandage the economy last year, the Federal Reserve cut short-term interest rates to close to zero and began printing trillions of dollars. Fed Chair Jerome Powell said the reserve would allow the inflation to continue a little longer before thinking of raising interest rates again.
In response to the inflation, crypto may be transforming from being seen as a volatile investment to an inflation hedge, as big players in hedge funds began buying up bitcoin in May. Paul Tudor Jones was reported saying that bitcoin will be the best inflation trade. Billionaire investor Stanley Druckenmiller also revealed he owns crypto.
In October 2020, PayPal said it would let users buy, sell and trade bitcoin, as well as make purchases with the select cryptocurrency at over 25 million businesses.
In February, MasterCard announced that it will soon start supporting select cryptocurrencies through its network.
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This month alone has been pretty crypto-heavy as well, with Coinbase going public, the cryptocurrency market value hitting over $2 trillion, and Visa revealing its pay with crypto feature.
While the future of crypto remains as cryptic as ever, pandemic has definitely fuelled a turning point in investors’ mindset.
PwC’s 2020 Global Crypto M&A Fundraising Report from March revealed a shift in investors’ attitudes towards cryptocurrencies, as well as stronger M&A deals in the industry.
Here are four charts showing how investment in and M&As in cryptocurrency shifted last year.
In terms of acquisition value, the US remained the top target country, taking up six of the top ten acquisitions.
Bitcoin exchange Binance acquired CoinMarketCap, a platform detailing crypto market stats for $400 million, making it the biggest acquisition deal in the industry ever.
Overall value of crypto M&A deals more than doubled in 2020 compared to 2019. Even when excluding Binance’s acquisition of CoinMarketCap, 2020 still saw an increase in average crypto M&A size.
In 2019, only one of the top ten deals were valued at over $100 million. In 2020, four of the top ten deals were valued at over $100 million. In addition, larger and more developed crypto companies were seen taking part in M&A deals. According to PwC, that could be a sign that the crypto industry is maturing.
In terms of types of investors putting money into crypto, the ratio hasn’t really changed compared to 2019. Traditional VCs and incubators remained in the top percent, with crypto focused VCs just behind. The percentage of crypto focused VCs investing in the space did increase, but only by 5%.
Interestingly, there were 194 less deals in 2020 compared to 2019. But the value of these deals combined increased in 2020. 2020’s combined equity fundraising amounted to over $4.6 billion -- over $1 billion more than last year.
Like in 2019, the most deals made in 2020 were seed rounds. But according to PwC, Series B+ type deals saw a significant jump in 2020, going from $30 million the year before to $90 million.