Cryptocurrency is a form of digital asset, first introduced in the late 2000s, and has seen a substantial increase in popularity in the past decade. While recent troubles, such as the FTX bankruptcy in November and runs on crypto-friendly banks in March, have understandably shaken the confidence of some investors, the sector as a whole has exhibited impressive strength. Financial investors remain active, M&A deals are still closing, and valuations for crypto-related companies have begun to converge with those of the Nasdaq Composite Index.

Crypto miners and blockchain tech companies, such as Bakkt, Block, Coinbase and PayPal, have seen their collective market caps drop in comparison to the Nasdaq, though the crypto mining sector has experienced a substantial rebound since the beginning of this year, coinciding with the large rally of Bitcoin (BTC). Though the blockchain group has lost 12%, crypto miners have gained 90% since April 2020, outperforming the Nasdaq–which has only grown by 63%.

Venture Capital investments in crypto or blockchain companies totaled $26.2 billion throughout 2022, with leading investments such as Celestia's $53 million in Series B and Matter Labs' $200 million in Series B funding rounds. Meanwhile, Coinbase was the most active financial investor, participating in 340 investments over the 1Q 2023, followed by NGC Ventures with 258, both primarily based in US, China, and Singapore.

Regarding M&A activity, substantial deals have closed in the fourth quarter, including Gleec BTC Exchange's acquisition of Blocktane, Binance's purchase of TokyoCrypto, and Bankless' purchase of Earnifi. These deals signify an important shift in the market toward consolidation plays, either between geographic regions or technologies.

Overall, it is clear that things are not so bad in the crypto space. Valuations are generally strong and financial investors, as well as M&A activity, remain highly active. This is due to a few reasons – namely, investor's adoption of a less speculative stance, the pruning of non-viable players, and especially the diversification of the sector, with an emphasis on blockchain security platforms offering solutions to protect digital assets. It is through this lens that we can begin to construct a brighter future for the crypto asset class.



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