The blockchain industry shook off the madness of the 2020 pandemic, with many companies thriving in the “remote” work environments caused by COVID-19.
Nearly $ 700 million in mergers and acquisitions took place in 2020 across 83 transactions. That’s the highest number ever and a significant increase from the previous record of 69 M&A transactions in 2018. Most of the activity last year was in the industry itself, consolidating the industry with minimal involvement of external companies.
More than 90% of the reported $ 691 million was made up of the top three acquisitions from Binance ($ 400 million), FTX ($ 150 million) and Coinbase ($ 90 million).
Binance’s purchase of CoinMarketCap in late March 2020 for a reported $ 400 million was on par with the largest blockchain acquisitions of all time, rivaled only by Circle’s purchase of Poloniex and NXMH’s purchase of Bitstamp, both for $ 400 million, in 2018.
The most important fair in terms of volume was sharply criticized for the purchaseas it appears to represent a conflict of interest as CoinMarketCap is a data and analytics company providing comparative data on crypto exchanges including Binance.
Jack Purdy, an analyst for Messari, told Cointelegraph that the acquisition sets a negative precedent for the industry, regardless of how well either company behaves. “It represents a fundamental conflict of interest with negative externalities for space,” he said. “It’s like Joe’s Pizza came out with the top 10 pizza slices in New York and everyone who uses that list just happens to be the least informed when deciding where to go.”
“While Binance / CMC may be completely well-intentioned, there is no way that reviews are unaffected by the underlying bias of the creators. If a system has objective weightings that would hurt Binance’s reputation, it is more likely than not it will not be implemented. “
Binance has claimed that both companies are individual entities and that CMC has no bias. Despite the early criticism, it appears sentiment towards the acquisition has waned in recent months. In October 2020, FTX CEO Sam Bankman-Fried voiced his take on Twitter that Binance was actually a lifesaver for CoinMarketCap:
“Almost the day Binance bought CMC, things started to get better – a lot better. It has a lot of catching up to do, but the product has gone from hopeless f — ed to competitive. “
This was not the only activity of the leading exchange, with Binance acquiring multiple other companies in 2019 and 2020, including crypto debit card provider Swipe for an undisclosed amount. As with CoinMarketCap, Swipe Chief Operating Officer John Khenneth stated that too “The deal was structured to allow Swipe to run the company independently of Binance.”
In a recent press conference, Binance founder and CEO Changpeng Zhou hinted that the company will acquire between 20 and 30 other companies by 2021, further strengthening its position in the crypto sector.
Crypto exchange FTX, which only launched in 2019, was the only other company to make a nine-digit acquisition in 2020, with the purchase of portfolio management app Blockfolio for $ 150 million.
The purchase has the potential to bring its 6 million users to the stock exchange. While Blockfolio doesn’t have as many unique users as CoinMarketCap, the level of user engagement is significantly higher, with more than 150 million impressions per month.
Blockfolio co-founder and CEO Ed Moncada told Cointelegraph that the company will continue to operate as an independent app.
US crypto exchange Coinbase actually leads the pack with the largest number of acquisitions to date – six more than Binance. The company has closed at least 16 deals in its history, the most recent being the $ 90 million acquisition of premium brokerage platform Tagomi.
According to reports, Tagomi had been struggle with revenues of just $ 1 million of its $ 1 billion in annual trading volume after cutting trading costs.
Publicly traded companies also got involved, with CleanSpark, advanced software solutions company, acquiring crypto mining company ATL Data Centers for just under $ 20 million in shares of the company.
Other notable acquisitions include that of Galaxy Digital purchase from digital asset investment and loan platform DrawBridge Lending, as well as liquidity provider Blue Fire Capital. While the numbers have not been disclosed, Galaxy Digital said DrawBridge will receive more than $ 150 million in third-party assets as a result.
In September 2020, New York-based CB Insights announced that it would soon open an office in Amsterdam as part of the acquisition of blockchain data provider Blockdata for an undisclosed amount.
Smart contract provider Schiedwap also expands its reach, acquiring one of its biggest competitors, Team.Finance.
The recent acquisition of the second-tier Ethereum scaling solution OMG Network by Hong Kong-based over-the-counter trading firm Genesis Block would help accelerate the network’s development, with a specific focus on DeFi.
PayPal also wanted to join the mergers and acquisitions after it enabled crypto purchases for the first time; however, talks to acquire BitGo, cryptocurrency provider to show up to have fallen through now. Rumors suggest that PayPal is in talks with other crypto companies.
With the dramatic increase in decentralized funding this year, nascent DeFi protocols have also begun to merge. In November Yearn.finance continued a collaboration and merger, including with market coverage supplier Cover Protocol and Cream Finance lending protocol.
While acquisitions are often a sign of a thriving industry, they have led some critics to voice concerns about increasing centralization. Rival takeovers by leading companies strengthen their control of the market, potentially reducing competition.