- A new report finds that the number of mergers and acquisitions of cryptocurrency companies has grown by 200 percent in 2018
- As the market bleeds, investors are drawn to the falling prices of crypto companies
According to a report by CNBC , the number of mergers and acquisitions of cryptocurrency-related companies has more than doubled in the last year. From all indications, the reason for this is the slump that the value of bitcoin and other crypto projects have experienced in the last year.
Since its record high in December 2017, the price of bitcoin has fallen about 54 percent in value. The acquisition of cryptocurrency companies, however, has grown 200 percent.
The value of cryptocurrency companies are often determined and calculated in terms of Bitcoin rather than fiat. Thus, the crash of Bitcoin value means that companies can be acquired at a cheaper rate that they would have a year ago.
As a result, investors are taking advantage and grabbing projects at a discount.
Mergers on the rise
According to reports from last week, there have been 115 cryptocurrency-related deals announced this year, while the price of Bitcoin lingers around $6,500. It is also estimated that the number will grow to about 145 by the end of the year.
This is compared to the end of 2017, when the value of bitcoin was around $20,000 and the number of deals recorded for the year was 47.
The deals being recorded, however, are usually less than $100 million in value.
Why the soar?
The reason companies are seeing an increase in mergers and acquisitions while the value of bitcoin falls is because their value is linked to Bitcoin.
Although cryptocurrencies have lost about 65 percent of their market capitalization, values of companies and currencies still tend to be measured against Bitcoin which can give a false idea of what they are worth.
“You’re seeing a mispricing of assets,” Bajpai, who leads blockchain and digital assets investment banking at JMP, told CNBC in an interview. “Even for great businesses, the value of the token remains correlated to Bitcoin, which can create an ideal opportunity for strategic acquirers.”
As the cryptocurrency and blockchain industry grows, there is a higher demand for both companies and talent and while the ‘crypto winter’ lasts, investors seem determined to snatch up as much of the former as they can while the price is good.