Where did the cryptowhales invest in 2019?
The blockchain industry is changing dynamically — many business models are losing relevance, giving way to other areas.
For example, two years ago, ICO projects were extremely popular, which few people remember now. In particular, the Pantera ICO Fund, in which Mike Novogratz’s invested, suffers big losses. The company made a bet on little-known coins, but the “season of altcoins” did not come.
Cases of outright fraud, ranging from relatively small projects like REcoin ($2.8 million) or Eastern Metal Securities ($11 million) to the $2.9 billion Onecoin scam, also contribute to the drop in investor interest in the sphere.
Undoubtedly, the hype around blockchain and cryptocurrencies is not what it used to be. However, money is not a dead weight, there is some investment activity, especially among the giants of the industry.
We at Hedgeblock invite you to consider the dynamics of hedge Fund investments, activity in the field of mergers and acquisitions, as well as to find out in what areas the major players invested in 2019.
Sobering Crypto Winter
Despite some recovery of the market after the fierce crypto winter of last year, activity in the investment sector has noticeably faded. According to Crypto Fund Research, since the beginning of 2019, about 70 cryptocurrency hedge funds, focused mainly on large investors, have closed.
The chart 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 figures of the past two years.
Statistics on M&A (mergers and acquisitions) are not impressive either. The peak of activity in this area peaked in 2018, 160 deals. This year TokenData analysts predict only 90–100 large acquisitions in the crypto sphere:
Since 2013, 350 m&a transactions have taken place in the crypto industry. The peak of activity in this area fell in 2018, remembered by the collapse of the market after the dizzying rally of 2017.
“M&A activity is volatile and seems to positively correlate with cryptocurrency prices and prevailing industry sentiment. Monthly activity peaked in early 2018 when prices and interest in the industry were high“ the report said.
According to TokenData’s calculations, the total amount of m&a transactions since 2013 was $4 billion, with $2.8 billion in 2018 and less than $700 million in 2019.
“These numbers may seem impressive, but they are small compared to the total capitalization of cryptocurrencies (>$200 billion). This is logical, given the early stage of development of the industry: most companies are less than 5 years old, “ said in the report.
In 2019, there was only one deal worth more than $100 million — the takeover by the Kraken exchange of the Crypto Facilities derivatives platform.
There were five comparable deals in 2018.
It’s not that bad
On the other hand, there are also positive trends-if previously in the field of M&A dominated by purely financial mergers often with obscure motives, but recently the transaction has acquired a strategic nature.
“Upon closer examination of the financial aspect of M&A activity, it turns out that many acquisitions featured non-industry-related and discontinued companies that began to associate themselves with the blockchain (for example, Long Island Blockchain) through the acquisition of small cryptocurrency startups and reverse acquisitions”
TokenData believes that against the background 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 are more likely to acquire other companies, and exchanges are also quite active:
Unrelated cryptocurrency companies often acquire blockchain startups to increase their presence in the new industry. Example: the purchase of the largest social network Facebook startups Chainspace and Servicefriend for their involvement in the work on the Libra project.
There is some M&A activity among infrastructure companies developing protocols and decentralized applications (dApps) — around 40 acquisitions. Mining players quite often bought other companies before the 2018 correction, but their activity almost evaporated in 2019.
Palm at Coinbase
American cryptocurrency company Coinbase is the undisputed leader in strategic mergers and acquisitions. The company has 16 M&A deals on its account, with Earn (more than $100 million) and Xapo ($55 million) among the largest deals.
Kraken and Coinsquare exchanges are also quite active — 7 and 5 trades respectively. About Binance experts TokenData note the following:
“Despite its size, growth and diversity of offerings, Binance has so far made only three public acquisitions — Trust Wallet, JEX and WazirX. However, Binance’s track record includes significant investments in other cryptocurrency companies and partnerships whose strategic impact is comparable to M&A.”
Many companies resort to mergers and acquisitions to overcome various regulatory hurdles.
“For cryptocurrency exchanges, M&A is a strategic tool for obtaining regulatory approvals in certain jurisdictions and for certain products. They acquire companies that have the appropriate licenses, “ TokenData experts explained.
Where do the largest funds of the crypto industry invest?
The Block published an infographic, which shows the main objects of investment of the largest cryptocurrency funds in 2019:
Let’s take a closer look at the projects in which these funds were invested.
NGC Ventures is a Singapore-based blockchain venture capital firm.
- Solana — works on a distributed cryptographic Protocol using the Proof of History (PoH) consensus mechanism.
- Vid — is a social media platform based on blockchain.
- Nash — is a non-custodial digital asset exchange.
- CoinFLEX — is a cryptocurrency futures delivery platform.
- Dapix — works on interoperability between wallets.
- Vega Protocol — is a Protocol for creating and trading derivatives in a decentralized network.
- Elrond — is a high-performance network based on the Proof-of-Stake algorithm.
- TEEX — second-level solutions running in a secure execution environment (TEE)
- Marlin Protocol — cross-chain solutions.
- Helis Network — aggregator of DeFi-platforms.
- POA Network — infrastructure solutions based on Ethereum.
Coinbase Ventures is a division of the American company Coinbase, investing in crypto and blockchain startups in the early stages of the life cycle.
- Pinata — development kits and APIs for interacting with IPFS.
- InstaDApp — is a “smart wallet” for decentralized Finance.
- Linen App — is a crypto lending 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 sharding support.
- Textile — tools for scaling applications on the basis of the IPFS.
- BlockFi — lending on the security of digital currencies and solutions for asset management.
- BLADE — is a 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-computing systems using cryptocurrencies. - Commonwealth — is an on-chain management portal.
- Bitski — software solutions for interaction of digital wallets with other applications.
Digital Currency Group is 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 analytical service specializing in the crypto industry.
- Bitmark — solutions in the field of digital rights.
- Livepeer — is a decentralized streaming platform based on Ethereum.
- Horizon — is an Ethereum-based video game platform and wallet.
- Digital Assets Data — is an analytical platform for the crypto industry.
- Qohash — data protection solutions.
- Merkle Science — risk management solutions that allow companies to identify the facts of the use of cryptocurrency in illegal transactions.
- Jackpocket — lotteries using cryptocurrency.
- Curv — is a digital wallet focused on institutional.
- Tagomi — is a cryptocurrency broker.
- Figure — credit lines secured by residential real estate; the startup uses its own blockchain Provenance.
- Horizen Labs — enterprise solutions based on technologies of the distributed registry.
- Nivaura — blockchain solutions to the issue of financial assets and management.
- Coinhouse — is a French cryptocurrency exchange.
- Lucid Sight — is a developer of Ethereum-based blockchain games.
- Staked — is a platform for institutional investors, which allows receiving income from cryptocurrencies based on the Proof-of-Stake algorithm.
Fenbushi Capital is Asia’s most active venture capital firm specializing in blockchain projects. Founded in 2015.
- Amberdata — is a research startup.
- SIBEX — is a Swiss crypto exchange.
- Verady — is a provider of accounting and tax solutions for the crypto industry.
- InfoCorp — is a platform based on the FarmTrek blockchain, providing financial services for developing countries.
- BlockApps — corporate BaaS solutions.
- AlphaWallet — is a mobile Ethereum wallet.
- Mythical Games — is a blockchain game developer.
- Edge — is a developer of digital wallet and custodial solutions.
- Finector — is a provider of research and consulting services for the blockchain and crypto industries.
- Chronicled — corporate blockchain solutions for supply chain management.
- OceanEX — is a cryptocurrency exchange.
- Cere Network, Securitize, the publication of the Block.
Galaxy Digital Ventures-manages a diversified investment portfolio including infrastructure, custodial and B2B solutions. The company also manages a venture capital Fund with $336 million in assets.
The aforementioned BlockApps, BlockFi, Digital Assets Data, Bitski, Flipside Crypto and Mythical Games as well:
- Spring Labs — data protection solutions;
- Casper Labs — developer of PoS-Protocol based on Casper solution;
Immutable is a blockchain game developer who created Gods Unchained; - Bison Trails — blockchain infrastructure solutions;
- Cipher Trace — developer of analytical tools for cryptocurrencies and blockchain;
- Ripple — is a California-based FINTECH startup, also known for the XRP token;
- Symbiont — is a startup focused on the corporate sector, introducing blockchain into traditional financial market technologies.
Dragonfly Capital Partners is a venture capital Fund with offices in San Francisco and Beijing.
CoinFLEX and Tagomi as well:
- Anchorage — cryptomaterial solutions;
- Compound — DeFi application Protocol;
- Sia — is a decentralized cloud platform for data storage;
- ErisX — cryptocurrency derivatives exchange;
- Tendermint — the Protocol on the basis of which the Cosmos cross-chain platform works;
- CoinMetrics — is a research startup;
- Nuo — is an India-based DeFi lending platform.
Polychain Capital is a San Francisco-based blockchain-focused hedge Fund.
Linen App, CoinFLEX, Horizon, o (1) Labs, Anchorage, and:
- Coinlist — tokensale platform;
- Juno — neobank and alternative investment platform;
- Agoric — smart contract security solutions;
- Altcoinomy — cryptocurrency marketmaker, OTC-service;
- Fold — e-commerce is an application that pays rewards in BTC;
- Dharma Labs — DeFi-lending platform;
- Celo — mobile application for cryptocurrency payments;
- Ava — is “a platform for new assets, markets and decentralized applications.”
CMT Digital is a division of CMT Group, specializing in trading, infrastructure and other solutions using blockchain.
Flipside Crypto, BlockFi, ErisX, and:
- Seed CX — institutional cryptocurrency exchange;
- trueDIGITAL — exchange and provider of solutions based on digital assets;
- PDAX — Filipino crypto currency exchange;
- Rain — crypto exchange focused on the Middle East;
- Abra — is an application that allows you to invest in cryptocurrencies.
Robot Ventures — is a company investing in FINTECH and crypto startups in the early stages of the life cycle.
Bitski, Compound, InstaDApp, And:
- For coinmine — a device for mining the cryptocurrency at home;
- Po1nt — mobile banking;
- Centrifuge — decentralized platform for supply chains;
- Elementus — is an analytical company specializing in blockchain;
- Ampleforth — stablecoin, positioning itself as “ smart commodity money»;
- Keyless — secure authentication service;
- Multis — is a crypto wallet for integration with landing pages 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.
Summary
In 2017 — early 2018, large transactions in the crypto industry 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 M&A. Probably, by inertia after a turbulent 2017, bearish 2018 was the most fruitful in mergers and acquisitions — 160 transactions. Only 90–100 major acquisitions are forecasted this year.
However, there are also positive aspects, for example, if previously market was dominated by purely financial mergers often with opaque motives, recently m&a transactions are more often characterized by a strategic nature.
Investment funds and exchanges are most active. 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.
Want to streamline your OTC experience with Hedgeblock? Contact us
