Three Deals ‘Emblematic’ of Market During Record Q1 for Crypto M&A

The number of crypto mergers and acquisitions hit an all-time quarterly high in the first three months of 2023, as deals exclusively between companies in the segment ramped up.   

Total deal count hit 54 during the quarter, according to a report by advisory firm Architect Partners — up from 50 mergers and acquisitions (M&A) transactions in each of the two previous quarters.  

Despite the rise in the number of deals, the value of them — roughly $400 million — decreased sharply from the first quarter of 2022, when 50 deals were valued at about $1.6 billion.

Crypto deals by quarter | Source: Architect Partners

Architect Partners co-founder Steve Payne pointed out that many of the first quarter acquisitions — 36 of 54, according to the report — were intra-crypto transactions, or deals done between two sector-native firms, which strays from a historical trend.    

Deals involving traditional finance companies, for example, accelerated in 2021 as they sought to build a crypto presence by purchasing capabilities.  

“Plenty of crypto native companies are healthy enough to go on the offensive and make opportunistic strategic acquisitions to add capabilities, even in a downturn,” Payne told Blockworks.

The all-time high first quarter M&A activity followed a record year for such transactions despite caution among acquirers and investors amid the FTX collapse last November and banking sector struggles earlier this year. 

“As we move past these major disruptions, we expect that deal activity will continue to grow modestly,” he said. “Valuations, however, are significantly down from last year, and we doubt this will return to 2022 levels for quite a while.”

Three acquisitions stand out

Payne labeled three deals by Coinbase, ConsenSys and Hut 8 Mining as “emblematic” of the current market.

Coinbase acquired One River Digital Asset Management in March — the exchange’s first buy since closing a $275 million deal for derivatives exchange FairX in February 2022.

The crypto exchange said in a blog post at the time the acquired firm would help form Coinbase Asset Management and allow it to offer investment advisory services to institutional clients.

Payne said the deal to purchase an SEC-registered investment advisor shows that regulatory pressures can drive acquisitions. 

“One River serves the institutional market, viewed as less volatile than the retail segment and ready for growth,” he added. 

ConsenSys also bought blockchain development tooling platform HAL, which Payne said fits the narrative of companies investing in infrastructure to build Web3 applications. 

Companies developing dapps — or the tools and infrastructure to build them — accounted for 43% of the M&A activity last quarter, Architect Partners data shows. 

Finally, crypto mining companies Hut 8 and US Bitcoin Corp revealed merger plans in February. The combined firm was set to have self-mining operations at five sites across New York, Texas, and Alberta, Canada, the companies said.

“It shows that the mining sector continues to struggle due to depressed pricing and increasing mining difficulty and signals continuing consolidation among the larger players,” Payne said.

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