The blockchain industry shook off the craziness of the 2020 pandemic, and many businesses thrived in the “remote” work environments caused by COVID-19.
Nearly $ 700 million worth of mergers and acquisitions took place in 83 transactions in 2020. This is the largest number ever and a significant increase from the previous record of 69 M&A deals in 2018. Most of the activity last year took place in the industry itself, consolidating the sector with minimal external company involvement.
More than 90% of the $ 691 million reported were made by the three largest acquisitions of Binance ($ 400 million), FTX ($ 150 million) and Coinbase ($ 90 million).
Binance’s purchase of CoinMarketCap in late March 2020 for a reported $ 400 million matched the largest blockchain acquisitions of all time, competing only with Circle’s purchase of Poloniex and NXMH’s purchase of Bitstamp for $ 400 million in 2018.
The leading exchange by volume received harsh criticism of the buy as it poses a conflict of interest as CoinMarketCap is a data and analytics company that provides comparative data on crypto exchanges, including Binance.
Jack Purdy, an analyst for Messari, told Cointelegraph that the acquisition sets negative precedent for the industry, regardless of how well both companies do. “It represents a fundamental conflict of interest that has negative externalities for the space,” he said. “It’s like Joe’s Pizza brought out the 10 best pizza slices in New York and anyone who uses this list is the one least informed to make a decision about where to go.”
“While Binance / CMC can be well-intentioned, it is impossible that reviews are not influenced by the underlying tendency of the developers. If a system has objective weights that would affect Binance’s reputation, it is very likely that it will not be implemented. “
Binance has claimed that both companies are individual companies and that there are no biases from CMC. Despite the early criticism, sentiment towards the acquisition seems to have weakened in recent months. In October 2020, Sam Bankman-Fried, CEO of FTX, expressed his opinion on Twitter that Binance was indeed a lifesaver for CoinMarketCap:
“Almost the day Binance bought CMC, it got better – a lot better. There is a lot of catching up to do, but the product has gone from being hopeless to being competitive. “
This wasn’t the only activity by the leading exchange that saw Binance acquire several other companies in 2019 and 2020, including crypto debit card provider Swipe for an undisclosed sum. Similar to CoinMarketCap, John Khenneth, Swipe’s Chief Operating Officer, stated: “The deal has been structured so that Swipe can run the company independently of Binance.”
Other acquisitions by Binance include the Korea-based stablecoin company BxB, the decentralized app information platform DappReview and the Indian crypto exchange WazirX.
In a recent press conference, Binance founder and CEO Changpeng Zhou pointed out that the company will acquire between 20 and 30 more companies in 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 and buy the Blockfolio portfolio management app for $ 150 million.
The purchase has the potential to bring its 6 million users public. While Blockfolio doesn’t have as many unique users as CoinMarketCap, user engagement is significantly higher with more than 150 million impressions per month.
Ed Moncada, co-founder and CEO of Blockfolio, told Cointelegraph that the company will continue to function as an independent app.
The US crypto exchange Coinbase leads the way with the largest number of acquisitions to date – six more than Binance. The company has completed at least 16 transactions in its history, most recently the acquisition of the prime brokerage platform Tagomi for $ 90 million.
Tagomi reportedly struggled with just $ 1 million in revenue from its $ 1 billion annual trading volume after trading fees were lowered.
Listed companies also took part. Progressive software solutions company CleanSpark acquired crypto mining company ATL Data Centers for shares in the company valued at nearly $ 20 million.
Other notable acquisitions include the acquisition of the digital asset investment and credit platform DrawBridge Lending by Galaxy Digital and the liquidity provider Blue Fire Capital for futures markets. Although the numbers were not disclosed, Galaxy Digital said that 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 at an undisclosed price as part of the acquisition of blockchain data provider Blockdata.
The intelligent contract provider BäumenWap also expanded its reach and acquired 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 company Genesis Block is expected to help accelerate the development of the network, with a particular focus on DeFi.
PayPal also wanted to join the merger and acquisition party after it first enabled crypto purchases. The talks to take over the crypto custody provider BitGo seem to have failed, however. Rumors have it that PayPal is in talks with other crypto companies.
With the dramatic increase in decentralized funding this year, the burgeoning DeFi protocols have also come together. In November, Yearn.finance entered into a collaboration and a merger with, among others, the market coverage provider Cover Protocol and the credit protocol Cream Finance.
While acquisitions are often a sign of a thriving industry, they have prompted some critics to raise concerns about increasing centralization. The takeover of competitors by leading companies strengthens their control of the market and potentially reduces competition.