Major Mergers and Acquisitions Crypto 2020
In the midst of the chaos of 2020, crypto-currency companies recorded almost $700 million in mergers and acquisitions.
The blockchain industry did not pay much attention to the pandemic madness of 2020, and many companies thrived in the “remote” working environments caused by COVID-19.
Nearly $700 million in mergers and acquisitions took place in 2020 through 83 transactions.
This is the highest number ever and a significant increase from the previous record of 69 M&A transactions in most of last year’s activity was within the industry itself, consolidating the sector with minimal commitment from outside firms.
Over 90% of the $691 million reported was comprised of the three major acquisitions of Binance ($400 million), FTX ($150 million) and Coinbase ($90 million).
The report of the purchase of CoinMarketCap by Binance at the end of March 2020 for an amount of 400 million dollars is equivalent to the biggest blockchain acquisitions of all times, only surpassed by the purchase of Poloniex by Circle and the purchase of Bitstamp by NXMH, both for 400 million dollars, in 2018.
The main volume exchange received harsh criticism for the purchase, as it seems to represent a conflict of interest, given that CoinMarketCap is a data and analysis company that provides comparative data on cryptomoney exchanges, including Binance.
Jack Purdy, a Messari analyst, told Cointelegraph that the acquisition sets a negative precedent for the industry, no matter how well either company performs. “It represents a fundamental conflict of interest that has negative external implications for space,” he said. “It’s like Joe’s Pizza coming out with the top 10 slices of pizza in New York, and everyone who uses that list turns out to be the least informed in making the decision on where to go.
“While Binance/CMC may be completely well-intentioned, it is impossible that the rates are not influenced by the underlying bias of the creators. If there are objective weights in a system that would harm Binance’s position, it is more likely that it will not be implemented”.
Binance has stated that both companies are individual entities and that there is no CMC bias. Despite initial criticism, it appears that sentiment towards the acquisition has softened in recent months. In October 2020, FTX CEO Sam Bankman-Fried expressed his opinion on Twitter that Binance was indeed a lifesaver for CoinMarketCap:
“About the day Binance bought CMC, it started to get better, and much better. It has a lot of catching up to do, but the product has gone from being hopelessly bad to competitive.
This was not the only activity of the leading exchange, as Binance acquired multiple other companies throughout 2019 and 2020, including the debit card provider Swipe for an undisclosed sum. Similar to CoinMarketCap, Swipe’s chief operating officer, John Khenneth, also stated that “The deal was structured so that Swipe can run the company independently of Binance.
Other acquisitions by Binance include Korea-based stablecoin BxB, the DappReview decentralized application information platform and the Indian cryptomoney exchange WazirX.
At a recent press conference, Binance founder and CEO Changpeng Zhao hinted that the company will acquire 20 to 30 more companies by 2021, further strengthening its position in the cryptomone industry.
The FTX crypto coin exchange, which was not launched until 2019, was the only other company to make a nine-figure acquisition in 2020, with the purchase of the Blockfolio portfolio management application for $150 million.
The purchase has the potential to bring its 6 million users to the exchange. Although Blockfolio does not have as many unique users as CoinMarketCap, the level of user engagement is considerably higher, with over 150 million impressions per month.
Blockfolio’s co-founder and CEO, Ed Moncada, told Cointelegraph that the company will continue to operate as an independent application.
The U.S. crypto currency exchange Coinbase leads the pack with the largest number of acquisitions to date - six more than Binance. The company has completed at least 16 transactions in its history, with the most recent acquisition of the Tagomi prime brokerage platform for $90 million.
According to reports, Tagomi had been struggling with revenues as low as $1 million of its $1 billion annual trading volume, after it reduced trading rates.
Listed companies also got involved, with advanced software solutions company CleanSpark acquiring crypto-mining company ATL Data Centers for just under $20 million of the company’s stock value.
Other notable acquisitions include Galaxy Digital’s purchase of the DrawBridge Lending digital asset investment platform, as well as the liquidity provider for the Blue Fire Capital futures markets. Although the figures were not disclosed, Galaxy Digital said that DrawBridge will end up with more than $150 million in third-party assets as a result.
In September 2020, New York-based CB Insights announced that it would soon open an office in Amsterdam as part of its acquisition of data provider Blockdata for an undisclosed sum.
The smart contract provider TrustSwap also expanded its reach, acquiring one of its largest competitors, Team.Finance.
The recent acquisition of the second layer scaling solution Ethereum OMG Network by Hong Kong-based over-the-counter trading company Genesis Block is said to have helped accelerate the development of the network, focusing specifically on DeFi.
PayPal was also looking to join the M&A party after enabling purchases with crypto currencies for the first time; however, discussions to acquire the crypto currency escrow provider BitGo appear to have failed. Rumors suggest that PayPal is in discussions with other cryptomoney companies.
With the dramatic increase in decentralized finance this year, the burgeoning DeFi protocols have also begun to merge. In November, Yearn.finance began a process of collaboration and merger, including the market coverage provider Cover Protocol and the loan protocol Cream Finance.
While acquisitions are often a sign of a thriving industry, they have caused some critics to raise concerns about increasing centralization. Acquisitions of rivals by leading companies strengthen their control of the market, which can reduce competition.