The blockchain industry is changing dynamically - many business models are losing relevance, giving way to others directions.
For example, two years ago were extremely popularICO projects, which few people now recall. In particular, the Pantera ICO fund, in which the Galaxy Digital cryptocurrency bank invested by Mike Novogratz, suffers large losses. The company relied on little-known coins, but the “altcoin season” never came.
The fall in investor interest in the sector is promoted byand cases of overt fraud, ranging from relatively small projects like REcoin ($ 2.8 million) or Eastern Metal Securities ($ 11 million) to a $ 2.9 billion scam by OneCoin.
Undoubtedly, the hype around the blockchain and cryptocurrencies is not the same as it was before. However, money does not lie dead weight, there is some investment activity, especially among industry giants.
ForkLog magazine offers readers to consider the dynamics of hedge fund investments, activity in the field of mergers and acquisitions, as well as find out in which areas major players invested in 2019.
Despite some market recovery afterthe fierce cryptozymes of last year, activity in the investment sphere has noticeably waned. According to Crypto Fund Research, since the beginning of 2019, about 70 cryptocurrency hedge funds have been closed, focused mainly on large investors.
The graph below shows that the largest number of such funds were launched in 2017 and 2018 (291 and 284, respectively):
The number of funds opened this year is not even half of the indicators of the past two years.
Not impressive and statistics on M&A (mergersand acquisitions). The peak of activity in this area was in 2018 - 160 transactions. This year, TokenData analysts predict only 90-100 major acquisitions in the cryptosphere:
“M&A activity is unstable and seems to bepositively correlates with cryptocurrency prices and prevailing moods in the industry. Monthly activity peaked in early 2018, when prices and interest in the industry were high ”, - the report says.
According to TokenData estimates, the total amount of M&A transactions since 2013 amounted to $ 4 billion. At the same time, $ 2.8 billion fell in 2018 and less than $ 700 million in 2019.
“These numbers may seem impressive, but theysmall compared to the total capitalization of cryptocurrencies (> $ 200 billion). This is logical, given the early stage of industry development: most companies are less than 5 years old ”, - experts explain.
In 2019, there was only one deal worth more than $ 100 million - the absorption by the Kraken exchange of the platform of derivatives Crypto Facilities.
In 2018, there were five transactions of comparable scale.
Not so bad
On the other hand, there have been positivetendencies - if earlier purely financial mergers, often with obscure motives, prevailed in the M&A sphere, recently, deals have become strategic.
“With a closer look at financialthe aspect of M&A activity, it turns out that many acquisitions featured non-industry and discontinued companies that began to associate themselves with blockchain (for example, Long Island Blockchain) through the acquisition of small cryptocurrency startups and reverse takeovers ”
TokenData believes that against the backdrop of a sobering correction in 2018, “opportunistic and sometimes obscure” deals began to disappear in the sphere, giving way to strategic M&A.
Investment funds more often than others are acquired by other companies; exchanges are also quite active:
Non-cryptocurrency companies oftenacquire blockchain startups to increase their presence in the new industry. Example: purchase of Chainspace and Servicefriend startups by the largest social network Facebook to engage them in work on the Libra project.
There is some M & A activity amonginfrastructure companies developing protocols and decentralized applications (dApps) - about 40 acquisitions. Mining players quite often bought other companies before the correction of 2018, but their activity practically evaporated in 2019.
American cryptocurrency company Coinbase -The undisputed leader in strategic mergers and acquisitions. The company has 16 M&A transactions, among the largest transactions are Earn (more than $ 100 million) and Xapo ($ 55 million).
The Kraken and Coinsquare exchanges are also quite active - 7 and 5 transactions, respectively. As for Binance, TokenData experts note the following:
“Despite its size, growth and diversityof proposals, Binance has so far made only three public acquisitions - Trust Wallet, JEX and WazirX. Nevertheless, the Binance track record has significant investments in other cryptocurrency companies and partnerships whose strategic effect is comparable to M&A. ”
Many companies resort to mergers and acquisitions to overcome various regulatory obstacles.
“For cryptocurrency exchanges, M&A is a strategicA tool for obtaining regulatory approvals in certain jurisdictions and for certain products. They acquire companies with the appropriate licenses. ”, - TokenData experts explained.
Where do the largest crypto industry funds invest?
The Block publication presented an infographic that shows the main investment objects of the largest cryptocurrency funds in 2019:
Let us consider in more detail in which projects these funds were invested.
NGC Ventures Is a Singapore-based venture company specializing in blockchain.
Solana - working on a distributed cryptographic protocol using the Proof of History (PoH) consensus mechanism.
Vid is a blockchain-based social media platform.
Nash is a non-custodian digital asset exchange.
CoinFLEX is a supply cryptocurrency futures platform.
Dapix - Works on interoperability between wallets.
Vega Protocol is a protocol for creating derivatives and trading them in a decentralized network.
Elrond is a high-performance network based on the Proof-of-Stake algorithm.
TEEX - Second Level Solutions in a Safe Execution Environment (TEE)
Marlin Protocol - cross-chain solutions.
Helis Network is an aggregator of DeFi platforms.
POA Network - infrastructure solutions based on Ethereum.
Coinbase ventures - A division of the American company Coinbase, investing in crypto and blockchain startups in the early stages of the life cycle.
Pinata - a set of development tools and APIs for interacting with IPFS.
InstaDApp is a “smart wallet” for decentralized finance.
The Linen App is a cryptocredit platform that plans to launch other fintech products in the future.
Securitize is a security token platform.
NEAR Protocol is a public PoS blockchain with support for sharding.
Textile - tools for scaling IPFS-based applications.
BlockFi - loans secured by digital currencies and asset management solutions.
BLADE - cryptocurrency exchange.
Alchemy - infrastructure blockchain solutions.
Torus - private key management solutions.
Horizon is a video game platform and Ethereum wallet.
Cadence is an alternative investment platform for accredited investors.
o (1) Labs - computer systems using cryptocurrencies.
Commonwealth - a portal of on-chain management.
Bitski - software solutions for the interaction of digital wallets with other applications.
Digital currency group - One of the most active investment firms in the crypto industry. Its portfolio includes more than 100 companies.
Bitso is a Mexico-based cryptocurrency exchange.
Flipside Crypto is an analytic service specializing in the crypto industry.
Bitmark - digital rights solutions.
Livepeer is a decentralized streaming platform based on Ethereum.
Horizon is an Ethereum-based video game and wallet platform.
Digital Assets Data is an analytic platform for the crypto industry.
Qohash - data protection solutions.
Merkle Science - risk management solutions that allow companies to identify facts of the use of cryptocurrency in illegal operations.
Jackpocket - cryptocurrency lotteries.
Curv is an institutional oriented digital wallet.
Tagomi is a cryptocurrency broker.
Figure - credit lines secured by residential real estate; The startup uses its own Provenance blockchain.
Horizen Labs - enterprise solutions based on distributed registry technology.
Nivaura - blockchain solutions for the issuance and management of financial assets.
Coinhouse is a French cryptocurrency exchange.
Lucid Sight is a developer of blockchain games based on Ethereum.
Staked is a platform for institutional investors that allows you to earn income from cryptocurrencies based on the Proof-of-Stake algorithm.
Fenbushi capital - The most active venture capital firm in Asia, specializing in blockchain projects. Founded in 2015.
Amberdata is a research startup.
SIBEX is a Swiss cryptocurrency exchange.
Verady is a provider of accounting and tax solutions for the crypto industry.
InfoCorp is a FarmTrek-based blockchain platform that provides financial services for developing countries.
BlockApps - corporate BaaS solutions.
AlphaWallet is a mobile Ethereum wallet.
Mythical Games is a blockchain games developer.
Edge is a developer of digital wallet and custodial solutions.
finector - a provider of research and consulting services for the blockchain and crypto industries.
Chronicled - enterprise blockchain solutions for supply chain management.
OceanEX - cryptocurrency exchange.
Cere Network, Securitize, The Block Edition.
Galaxy Digital Ventures - manages a diversified investment portfolio, including infrastructure, custodial and B2B solutions. The company also manages a venture capital fund with assets of $ 336 million.
The aforementioned BlockApps, BlockFi, Digital Assets Data, Bitski, Flipside Crypto and Mythical Games, as well as:
- Spring Labs - data protection solutions;
- Casper Labs - developer of the PoS protocol based on the Casper solution;
- Immutable - a blockchain game developer who created Gods Unchained;
- Bison Trails - infrastructure blockchain solutions;
- Cipher Trace - developer of analytical tools for cryptocurrencies and blockchain;
- Ripple - California fintech startup, also known as the XRP token;
- Symbiont is a corporate sector-oriented startup that implements blockchain in traditional technologies of the financial market.
Dragonfly capital partners - venture capital fund with offices in San Francisco and Beijing.
CoinFLEX and Tagomi, as well as:
- Anchorage - cryptocastodial solutions;
- Compound - protocol of DeFi-applications;
- Sia - a decentralized cloud storage platform;
- ErisX - cryptocurrency derivatives exchange;
- Tendermint - the protocol on the basis of which Cosmos cross-platform platform works;
- CoinMetrics - research startup;
- Nuo is an India-based DeFi lending platform.
Polychain capital - San Francisco-based blockchain hedge fund.
Linen App, CoinFLEX, Horizon, o (1) Labs, Anchorage, as well as:
- Coinlist - token sale platform;
- Juno - neobank and alternative investment platform;
- Agoric - solutions for the security of smart contracts;
- Altonomy - cryptocurrency market maker, OTC service;
- Fold - an e-commerce application that pays remuneration in BTC;
- Dharma Labs - DeFi lending platform;
- Celo - a mobile application for cryptocurrency payments;
- Ava is “a platform for new assets, markets and decentralized applications.”
CMT Digital - A division of the CMT Group, specializing in trading, infrastructure and other solutions using blockchain.
Flipside Crypto, BlockFi, ErisX, as well as:
- Seed CX - institutional cryptocurrency exchange;
- trueDIGITAL - exchange and provider of solutions based on digital assets;
- PDAX - Philippine Cryptocurrency Exchange;
- Rain - cryptocurrency exchange focused on the countries of the Middle East;
- Abra is an application that allows you to invest in cryptocurrencies.
Robot ventures - A company investing in fintech and cryptostarts in the early stages of the life cycle.
Bitski, Compound, InstaDApp, as well as:
- Coinmine - devices for cryptocurrency mining at home;
- Po1nt - mobile banking;
- Centrifuge - a decentralized platform for supply chains;
- Elementus - an analytical company specializing in blockchain;
- Ampleforth - stablecoin, positioning itself as a "smart commodity money";
- Keyless - secure authentication service;
- Multis is a cryptocurrency wallet for integration with landing and other services.
Thus, this year many funds invested in regional exchanges and other trading services.
Investments in wallets, Landing DeFi services and blockchain games are also popular.
In 2017 - early 2018, major transactions incrypto industries were concluded more often, and the amounts were larger. Thus, it becomes obvious that the activity of cryptocurrency funds positively correlates with the dynamics of the market.
A similar situation in the field of M&A. Probably, by inertia after the stormy 2017, Bear 2018 became the most fruitful in mergers and acquisitions - 160 deals. This year, only 90-100 major acquisitions are forecasted.
However, there are some positive aspects, for example, if purely financial mergers, often with opaque motives, used to prevail, recently M&A transactions have often been inherently strategic in nature.
Other companies acquire most activelyinvestment funds and exchanges. Often companies resort to M&A to overcome various regulatory barriers and, in particular, to obtain broker-dealer licenses.
In 2019, the largest funds mainly invested in exchanges and other trading services, Landing DeFi applications, wallets and blockchain games.