The crypto market remained red-hot following the election as many believe a change in the White House will bring a friendlier environment for digital currencies.
Could this resurgence also awaken the long-dormant M&A market for crypto startups, especially as funding has plummeted in the sector in recent years and many private companies may be looking to a lifeline?
The M&A deal environment has never really taken hold for venture capital-backed startups in the sector. The high point of the market was 2022, when only three dozen deals were completed, according to Crunchbase. data.
So far this year, more than two dozen deals have been completed, but only one deal of significant announced value: Robin Hoodthe $200 million purchase in June of a global stock exchange Bit stampwhich has more than 50 active licenses and registrations worldwide.
It’s time to close deals
However, the dynamics of crypto may have changed in recent weeks with the former president. Donald Trumpelectoral victory.
A lot of crypto is Hailing Trump’s victory as a watershed moment for the industry, as the federal government appears ready to embrace digital currencies. Trump’s victory too probably means eviction of SECOND President Gary Genslerwhich has adopted a strict approach to regulation by application of cryptography.
Bitcoin prices have surged nearly 40% since the election and hit a new high above $94,000 on Wednesday, while Ether climbed about 25% past the 3,000 mark $.
More importantly, for trading purposes, shares of major players in the crypto market have soared. The biggest winner so far has been the cryptocurrency exchange and cryptocurrency wallet platform. Coinbasewhose shares have soared nearly 60% since the election. Robinhood and crypto miner Mara Holdings also saw significant gains, with shares of both companies up about 40%.
Rising stock prices are important because they mean these companies may look more favorably on using their shares in deals to make acquisitions. No company likes to enter into stock trades when it believes its shares are low – or discounted – but when they approach a 52-week high, that attitude changes.
Some of these larger companies have been acquisitive in the past. Robinhood has already been mentioned, but Coinbase has also completed two dozen M&A deals in its history, according to Crunchbase. data.
That includes one deal this year: Coinbase’s acquisition of the San Francisco-based company. Utopia Laboratories for an undisclosed amount last week. The startup has developed an operating system aimed at decentralized autonomous organizations to manage payment requests and payroll.
Money may be needed
Rising stock prices of some crypto-related companies could come at an opportune time for many startups.
Venture capital funding has declined significantly in the sector in recent years. So far this year, crypto startups have raised just over $3 billion from investors in more than 500 deals, according to Crunchbase. data.
Based in Montreal Block flowa blockchain developer of digital asset infrastructure, has raised the largest funding round of the year so far: $210 million in convertible note funding.
These risk dollars and overall transaction amounts are significantly lower than the industry peak, set in 2021 – when crypto startups raised an incredible $21.5 billion in over 1,400 rounds.
This was followed in 2022 by investors pouring $15.6 billion in venture dollars into crypto startups in over 1,500 deals.
Many startups are now looking for money to survive in an environment where risk dollars have decreased. For many, an acquisition is the only real path forward. Right now, it looks like it might be a good time for these companies to be M&A-wise, even in an industry where M&A has been rare.
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Illustration: Dom Guzmán
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