The State of Crypto M&A 2022
Monday, August 8, 2022
TL;DR: Crypto M&A activity shows all signs of strength, despite a “bear market” in crypto prices and negative public sentiment.
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Deal Activity: Acquiring the 2022 dip
With crypto prices and sentiment down >75% from last year’s peak, M&A activity is still showing relative strength. While total deal activity might not reach the peak of 2021, it’s on track to surpass 2020 and the previous high of 2018.
We expect well capitalised crypto companies and protocols to take a more aggressive stance to go on an acquisition spree, now that valuations are at healthier levels and the crypto industry is focusing more on traction and product-market-fit.
Deal Value: Waiting for the next billion dollar deal
2022 deal value is on track to come in roughly 20% below the $10B we estimated for 2021. This is in line with what we’re seeing in outright deal activity, and excludes deal values from reverse mergers and SPACs.
The crypto industry has seen two billion dollar mergers so far: Galaxy Digital – BitGo ($1.2B) in 2021, and Bolt – Wyre ($1.5B) in 2022. We expect at least one billion dollar acquisition to happen before year-end to reflect the trend of private market valuation resets and industry consolidation.
Strategic M&A: Anything but “dead”
The 2017-18 market cycle saw a rapid increase in opportunistic Financial M&A (reverse mergers, private equity), which quickly dropped off after. This repeated in 2021 with a sharp increase in SPACs and private equity deals. Unsurprisingly, this opportunistic activity has dropped off sharply with the recent downturn. While Financial M&A has died once again, Strategic M&A is on pace to match or even surpass 2021. We see this as a signal of strength and maturity the industry needs.
Similarly, while smaller acquihires and tuck-ins drove M&A activity pre-2021, the industry is now of such a scale that horizontal consolidation and diversification mergers are the typical deal drivers.
NFTs: Emerging deals
10% of all Crypto M&A activity since 2021 involves companies that are active in the NFT and blockchain gaming subsector. OpenSea, the most prolific NFT company in crypto, has started to become active in M&A with two high profile acquisitions in the past year. OpenSea acquired Decentralized Finance startup Dharma Labs in early 2022. OpenSea’s trajectory is similar to what Coinbase went through in the 2017/18 cycle: It’s the clear incumbent in a crypto sector, has a decent warchest and this is likely to translate into an M&A strategy over the coming two years.
Full Report
Download the full report to get a data-driven overview of all Crypto M&A, including additional topics such as:
- Decentralized M&A: Protocol and decentralized applications are merging at rapid pace.
- Regulatory Impact on M&A: We are seeing a significant increase in regulatory driven M&A right now, as agencies across the world are making significant strides.
- Forecasts: Crypto M&A will accelerate into 2023.
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