Crypto M&A Skyrockets in 2018 With a Slumped Market

2018 has not been a good year for the cryptocurrency investors. However, the plunged price of Bitcoin has attracted a new breed of audience to the industry - the deal-makers.

According to PitchBook data compiled by JMP Securities, the deals related to the cryptocurrency and Blockchain companies has increased by 200 percent in 2018. These deals include majority investments, partial liquidation, and full acquisitions.

In 2017, 47 deals were completed in the crypto industry, however, this year, till mid-October, this number went up to 115, and by the end of 2018, it might hit 145.

Since January, the cryptocurrency market has gone through massive turmoil. Within a year, Bitcoin prices plunged heavily from around $20,000 to below $3,800, as per Coinmarketcap.com’s data. The market also shed more than 84 percent of its valuation to come down to $127 billion.

Best Time to Buy

Despite the bloodbath, many investors are seeing it as the perfect opportunity to invest in solid blockchain technology firms for a heavily discounted price. Satya Bajpai, head of JMP’s blockchain and digital assets investment banking unit, told CNBC: “You're seeing mispricing of assets. Even for great businesses, the value of the token remains correlated to Bitcoin, which can create an ideal opportunity for strategic acquirers.”

Explaining the heavy mergers and acquisitions of the nascent blockchain industry, Bajpai added: “It's expensive, but you get the technology and product immediately. This industry is like a treadmill — the only way to keep up on a treadmill is to keep running by investing in new technology.”

The tremendous growth of the industry has created a high demand for blockchain engineers, however, as the sector is only two to four years old, the number of these specialized engineers is still very low. Many deals are also inked to tap on a firm's human resources.

Equity vs. Token

However, as compared to traditional companies, blockchain-related deals have a higher level of complexity as most of these firms go for ICOs rather than traditional fundings from funding techniques. This creates a roadblock as institutional investors prefer equity rather than digital tokens.

"As soon as a company becomes interesting, they get bought — the deal size may still remain small, but the number of deals will increase because that's the most viable and fastest way to grow in this environment," Bajpai concluded.

2018 has not been a good year for the cryptocurrency investors. However, the plunged price of Bitcoin has attracted a new breed of audience to the industry - the deal-makers.

In 2017, 47 deals were completed in the crypto industry, however, this year, till mid-October, this number went up to 115, and by the end of 2018, it might hit 145.