In 2020, although investment and mergers and acquisitions in the crypto industry have been affected by the raging new crown epidemic around the world, due to the prosperity of the crypto market and the optimistic view of the long-term prospects of the crypto industry, there is still a large amount of venture capital into the blockchain and crypto industry . In terms of mergers and acquisitions, the number of mergers and acquisitions in the crypto industry in 2020 will hit a record high as the price of Bitcoin. Decentralized finance (DeFi), brokerage and custody, and data and analysis companies are the main investment trends this year.
IPO
Crypto-related companies and funds will raise USD 310 million in 2020 through IPO.
On June 26, Chinese mining machine giant Yibang International was listed on Nasdaq, becoming the second Chinese mining machine giant to be listed here after Canaan Technology, and it raised more than US$100 million.
On August 25th, Gibraltar-based cryptocurrency exchange INX launched an IPO to raise $7.5 million.
On December 11, 3iQ, a Canadian investment fund, conducted a $76.5 million Ethereum fund IPO on the Toronto Stock Exchange (TSX).
In 2020, there are also rumors that Coinbase is about to conduct an IPO. If Coinbase can finally succeed in IPO next year, as the most eye-catching unicorn company in the crypto industry, it will have an important impact on the entire crypto industry.
In addition, the encrypted lending financial technology BlockFi is also planned to appear on the public market, and the company may be listed as early as the second half of 2021.
VCs
The amount of venture capital invested in the crypto industry in 2020 is approximately US$3.1 billion, roughly the same as in 2019. The average investment scale is approximately US$5.7 million, and the median transaction size is US$1.8 million. In terms of the number of investments, there will be a total of 774 transactions in 2020, an increase of approximately 6% compared to 732 in 2019.
This year's venture capital activities have been affected by the new crown epidemic. In the first quarter, the financing amount reached a two-year high, but this momentum was suppressed by the epidemic. Of the 15 largest transactions this year, 40% occurred in the first quarter. These include the financing of Bakkt, Ripple, Digital Asset, Infinity Stones, Lightnet and Celo.
In the second quarter, the global economy was still in a difficult recovery, and there was no large-scale emergence in the crypto industry. In addition to the $35 million venture financing of Brave browser, there were also $28 million financing of LayerX, $22 million financing of Near Protocol and FalconX US$17 million in financing.
The summer's DeFi boom made the crypto investment market active again in the third quarter. Chainalysis, Bitpanda, BlockFi, Bitcoin Suisse, and Veem all received important investments, among which Bitpanda completed a US$52 million Series A financing led by Peter Thiel's Valar Ventures , BlockFi completed a $50 million Series C financing.
The fourth quarter of 2020 belongs to the Bitcoin and Hurricane crypto market, and venture capital institutions are more active. Several important venture capitals include Paxos' $142 million financing, Chainalysis's $100 million financing and Bitso's $62 million financing. These three transactions represent the three directions that venture capital funds focus on, brokerage/custodian companies, data and analysis providers, and potential exchanges.
The financing scale of crypto companies in 2020 is larger than that in 2019. ICE's crypto platform Bakkt received US$300 million in Series B financing. Investors include M12, Pantera Capital, PayU, CMT Digital and Boston Consulting Group to raise funds, which is also the history of the crypto industry. The second largest financing.
Ripple's US$200 million Series C financing led by Tetragon Financial Group is also eye-catching, and this is the second largest financing this year.
In third place is a $142 million Series C financing from crypto brokerage and infrastructure provider Paxos, with investors including Declaration Partners, PayPal Ventures and RIT Capital Partners.
M&A
In 2020, there were more than 83 mergers and acquisitions in the crypto industry, surpassing the highest record of 69 in 2018.
The largest of these is the acquisition of the encrypted data website CoinMarketCap for USD 400 million by the Binance Exchange, which marks the first major acquisition of a data analysis provider.
In second place, the crypto exchange FTX acquired Blockfolio, a portfolio management company, for $150 million. This provides FTX with a strong user base, and its goal is to achieve free transaction within the Blockfolio application.
In addition, Coinbase acquired the institutional encryption brokerage company Tagomi for $90 million, making its crypto empire more complete.
The acquisitions that have attracted much attention in 2020 but have not been successful come from PayPal and BitGo. Especially when PayPal launched its encrypted transaction service this year, the industry expects PayPal to go further in the encryption industry and implant more "cryptographic genes" through acquisitions. . Regrettably, in December, a person familiar with the matter revealed that the negotiations between the two sides had broken down.
Mergers and acquisitions in the DeFi field are equally eye-catching. After the summer's prosperity and chaos, some DeFi projects seek to complement each other through mergers.
Year (YFI), a revenue aggregation project, has formed a network of partnerships through the "acquisitions" of Pickle.Finance, Cover, Akropolis, Cream and SushiSwap. These DeFi agreements will work together to increase mutual liquidity. Although Yearn’s conduct cannot be regarded as a real M&A transaction, it conceptually lays the foundation for real M&A activities between agreements. The M&A transaction between the agreements is not to buy another company with stocks or cash, but to exchange assets with tokens and stablecoins.
Who is investing?
Investors who have been deeply involved in the encryption field in the past few years are still strengthening their investment this year, such as Coinbase Ventures, DCG, Dragonfly Capital, NGC Ventures, Pantera Capital, and Polychain Capital.
Other active investors include Alameda Research, CoinFund, ConsenSys Labs, Hashkey Capital, AU21 Capital, Binance, CMT Digital, IOSG Ventures, ParaFi Capital and SNZ Holding.
Among the most active investors, Coinbase Ventures conducted 25 investment transactions. The company invests extensively in the entire crypto ecosystem, and no single category of investment accounts for more than 20% of its investment.
In contrast, the investment field of Alameda Research, the second most active investor this year, is more concentrated. More than half of Alameda's investment is in DeFi projects, followed by crypto exchanges.
Among all funds, DCG still focuses on the banking and payment fields, and it has invested in Avanti Financial Group, Circle, Coinme, Lolli, Transparent Systems and Wyre.
trend
1. DeFi
DeFi is the most important investment trend in 2020. The success of new projects has attracted the attention of capital. Many investors did not pay attention to this field at the beginning of the year. Related investments began to appear in late June and reached a peak in September.
Approximately 31% of companies invested by the most active investors in 2020 are DeFi-related.
2. Brokerage and custody companies
Approximately 17% of the total venture capital investment in 2020 will be invested in crypto brokers and custody providers.
A total of US$525 million of funds flowed into companies such as Amber, Archax, B2C2, Bitcoin Suisse, Bitpanda, BlockFi, Copper, Crypto Finance, Curv, Diginex, FalconX, Fireblocks, METACO, OSL, Paxos, and Zero Hash.
Two eye-catching acquisitions in this area were Coinbase acquired crypto broker Tagomi, and SBI Financial Services, a subsidiary of Japanese financial group SBI Holdings, acquired market maker B2C2.
3. Data and analysis
Industry insiders expect that regulation and compliance will become potential hot spots in the encryption industry, which makes data and analysis companies more attractive.
In addition to the USD 400 million acquisition of CoinMarketCap by the Binance Exchange, Chainalysis also raised USD 100 million, and the blockchain analysis company's valuation reached USD 1 billion.
In addition, the acquisition of Blockdata by CB Insights is not large, but this shows that more external players are interested in entering the crypto market.
Conclusion
Capital never sleeps. As the crypto industry ecosystem matures and the crypto market flourishes, more funds will flow into this field in different ways.
In 2021, the encryption industry will accelerate integration, and unicorns in the encryption industry such as Coinbase may complete IPOs, which will further promote the encryption industry and encrypted assets into the mainstream.