The cryptocurrency M&A market – outlook

JMP Group LLC, a leading San-Francisco-based investment banking and asset management company, released its cryptocurrency findings for 2017 and shared an outlook on the M&A activity in the digital coin market for 2018.

According to the research, cryptocurrency M&A activity was not correlated with the pressure that has hit the overall cryptocurrency market in 2017. While the market capitalization for major digital coins such as Bitcoin and Ethereum has been slashed with some 50% from December 2017 up until now, cryptocurrency M&A is thriving.

Interestingly, the value of tokens that is associated with the startups that have issued them is still linked to the value of Bitcoin in a way, and not with the company’s value. And while the price of Bitcoin has seen huge volatility, going from $20,000 per coin to as low as $5,300, the value of tokens is highly correlated with Bitcoin’s value, which can be a competitive advantage for strategic acquirers.

The research also shows that cryptocurrency M&A is a highly desired option when it comes to ways of growing value instead of starting up an entirely new company.

Atoz Markets reported that for 2017, the blockchain-related M&A deals reached above 100. For 2018, this number can go as high as 145.

The head of blockchain at JMP Group, Mr. Satya Bajpai, said that the most recent strategy adopted by the majority of investors is the so-called “land grab” method, which means that companies prefer to “buy” rather than “build” from scratch. This can be explained by the fact that, while it may be more expensive to buy a company, the advantages of acquiring an already-knowledgeable company outweigh the costs.

Issues with the cryptocurrency M&A market are immaturity and difficult valuation methods.

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