2017 was the year of bulls. 2018, until now, has belonged to bears. Despite finding support on various price levels, crypto prices have been observing a downtrend on the whole.
Yesterday, we reported that Blockchain jobs had increased in 2018 despite the turbulent market, according to a report by Glassdoor.
Similarly, crypto and blockchain-related merger and acquisition (M&A) activity have risen by over 200% in 2018, CNBC reported Oct.18.
According to the data compiled by JMP Securities for Pitchbook, there have already been 115 M&A deals as of Oct. 15. and the number is set to hit 145 by the end of the year. In 2017, there had been only 47 M&A deals in total.
The report covers a wide number of M&A deals, including partial and full acquisitions. As far as the deal sizes are concerned, JMP has been cited by CNBC as saying that “majority” are “relatively small” – less than $100 million – and are “global in nature.”
Satya Bajpai, JMP Securities’ head of blockchain and digital assets investment banking, told CNBC that the so-called “crypto winter” presents an opportune moment for those eyeing access to innovative tech, intellectual property and talent in the emerging space.
Suggesting that the downturn in Bitcoin is depressing prices in the markets, he argued that, “You’re seeing a 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 rationale behind the M&A in the space, he added, “[The M&A route is] 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.”
He added, “Moreover, M&A offer a short-cut to access an existing user base or community, contributing to the perception that M&A deals are “the most viable and fastest way to grow” in the new space.”
He also went on to state that there are specific challenges posed by the sector such as institutional investors preference to buy a traditional equity in a project rather than invest in a particular token.
Other experts have also expressed similar views that the bear market is viewed as a favourable moment for institutional entry into the space. Venture capital investor Garry Tan commented on Twitter last month that the “crypto winter […] makes it safer for super-long-term oriented Yale-model institutions to enter at a price that isn’t dangerous.”