Ben Strack

It’s been a busy week for crypto M&amp;A — a signal the post-election sentiment shift could be a catalyst for even more such deals.&nbsp;



Architect Partners founder Eric Risley noted that crypto regulatory uncertainty in the US has put a damper on M&amp;A activity, given the country’s “outsized influence” on that front.



But Donald Trump’s election victory has spurred crypto price momentum, in part due to industry expectations around greater regulatory clarity and a less antagonistic approach to the segment.&nbsp;



“It&#8217;s frankly too early to have a clear vision as to exactly what those regulations will look like or timing,” Risley said. “However, it&#8217;s clear the tide is shifting.”



Since hitting a peak in March, trading volumes have been roughly flat over the past six months. The number of crypto M&amp;A deals shrunk from 50 during the second quarter to 35 in Q3, Architect Partners data shows.



“Perhaps we&#8217;re now at a new level of sustainable volume which is a major factor in the growth and profitability of trading-related crypto businesses,” Risley explained.&nbsp;



Six of the 22 crypto M&amp;A deals so far announced in Q4 were revealed this week.&nbsp;



That includes two asset management-centric transactions shared yesterday: Bitwise’s buy of Ethereum staking provider Attestant and an intended merge between Arca and BlockTower. Then this morning, Crypto.com said it bought Fintek Securities, a brokerage service and trading company with an Australian Financial Services Licence.



And let’s not forget the other big deal last month (<a href="https://blockworks.co/news/stripe-bridge-acquisition-stablecoin-infrastructure">Stripe’s buy of Bridge</a>), which Risley said “caught senior executive and board level attention across a broad array of crypto and traditional financial services companies.”



The tldr? Crypto M&amp;A developments could accelerate in Q4 and 2025, perhaps serving as a barometer for the sector’s trajectory.



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Latest crypto M&A deals signal ‘the tide is shifting’

The number of crypto mergers and acquisitions hit an all-time quarterly high in the first three months of 2023, as deals exclusively between companies in the segment ramped up.   



Total deal count hit 54 during the quarter, according to a report by advisory firm Architect Partners — up from 50 mergers and acquisitions (M&amp;A) transactions in each of the two previous quarters.  



Despite the rise in the number of deals, the value of them — roughly $400 million — decreased sharply from the first quarter of 2022, when 50 deals were valued at about $1.6 billion.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="2198" height="1064" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=1024&amp;h=1024" alt="" class="wp-image-52711" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=2198 2198w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/04/CHART-—-Crypto-deals-by-quarter-.jpg?w=80 80w" sizes="auto, (max-width: 2198px) 100vw, 2198px" /><figcaption class="wp-element-caption">Crypto deals by quarter | Source: Architect Partners</figcaption></figure>



Architect Partners co-founder Steve Payne pointed out that many of the first quarter acquisitions — 36 of 54, according to the <a href="https://architectpartners.com/q1-2023-crypto-market-report/">report</a> — were intra-crypto transactions, or deals done between two sector-native firms, which strays from a historical trend.&nbsp;&nbsp;&nbsp;&nbsp;



Deals involving traditional finance companies, for example, accelerated in 2021 as they sought to build a crypto presence by purchasing capabilities.&nbsp;&nbsp;



“Plenty of crypto native companies are healthy enough to go on the offensive and make opportunistic strategic acquisitions to add capabilities, even in a downturn,” Payne told Blockworks.



The all-time high first quarter M&amp;A activity followed <a href="https://blockworks.co/news/crypto-ma-deals-hit-record-high-in-2022-despite-downturn">a record year</a> for such transactions despite caution among acquirers and investors amid the FTX collapse last November and <a href="https://blockworks.co/news/biden-svb-signature-execs-fired">banking sector struggles</a> earlier this year.&nbsp;



“As we move past these major disruptions, we expect that deal activity will continue to grow modestly,” he said. “Valuations, however, are significantly down from last year, and we doubt this will return to 2022 levels for quite a while.”



<h2 class="wp-block-heading">Three acquisitions stand out</h2>



Payne labeled three deals by Coinbase, ConsenSys and Hut 8 Mining as “emblematic” of the current market.



<a href="https://blockworks.co/news/coinbase-one-river-acquisition">Coinbase acquired One River Digital Asset Management</a> in March — the exchange’s first buy since closing a <a href="https://blockworks.co/news/coinbase-acquires-regulated-futures-exchange-to-expand-derivatives-offerings">$275 million deal for derivatives exchange FairX</a> in February 2022.



The crypto exchange said in a <a href="https://www.coinbase.com/blog/coinbase-has-acquired-one-river-digital-asset-management">blog</a> post at the time the acquired firm would help form Coinbase Asset Management and allow it to offer investment advisory services to institutional clients.



Payne said the deal to purchase an SEC-registered investment advisor shows that regulatory pressures can drive acquisitions.&nbsp;



“One River serves the institutional market, viewed as less volatile than the retail segment and ready for growth,” he added.&nbsp;



ConsenSys also <a href="https://consensys.net/blog/press-release/consensys-acquires-hal-to-augment-infuras-blockchain-notification-and-automation-capabilities/">bought</a> blockchain development tooling platform HAL, which Payne said fits the narrative of companies investing in infrastructure to build Web3 applications.&nbsp;



Companies developing dapps — or the tools and infrastructure to build them — accounted for 43% of the M&amp;A activity last quarter, Architect Partners data shows.&nbsp;



Finally, crypto mining companies Hut 8 and US Bitcoin Corp <a href="https://blockworks.co/news/bitcoin-miners-cut-costs-rebound">revealed merger plans</a> in February. The combined firm was set to have self-mining operations at five sites across New York, Texas, and Alberta, Canada, the companies said.



“It shows that the mining sector continues to struggle due to depressed pricing and increasing mining difficulty and signals continuing consolidation among the larger players,” Payne said.



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Three Deals ‘Emblematic’ of Market During Record Q1 for Crypto M&A

<div id="highlights-block_61d6f110690a2" class="highlights">
 <ul>
 <li>“As a small firm, building a presence in an emerging area can be a tremendous competitive differentiator,” Architect Partners Managing Partner Eric Risley said</li>
 <li>The merge comes after crypto M&amp;A tripled and capital raise transactions nearly doubled from 2020 to 2021</li>
 </ul>
 
</div>



<a href="https://www.architectpartners.com" target="_blank" rel="noreferrer noopener">Architect Partners</a> is merging with crypto-native investment bank team <a href="https://emergents.co" target="_blank" rel="noreferrer noopener">Emergents</a> in an effort to become the go-to M&amp;A and financing advisory firm in the crypto space following a deal-filled year.



Architect Partners has delivered M&amp;A and strategic financing advisory services to entrepreneurs, public company senior executives and boards of directors since it was founded in 2010. The company tracks crypto mergers and acquisitions, private financings and public company valuation trends and publishes alerts on all announced transactions.



Emergents, founded in 2017, is an emerging technology investment bank team focused on crypto, blockchain and climate tech. It offers strategic advisory and capital raising services to innovators and entrepreneurs.



With the addition of the Emergents team, Architect Partner’s crypto unit is the largest group in the firm as measured by revenue and professionals, firm executives said.&nbsp;



Of the dozen or so employees at the company, about two-thirds are dedicated exclusively to the crypto space, Architect Partners Managing Partner Eric Risley told Blockworks.&nbsp;



“As a small firm, building a presence in an emerging area can be a tremendous competitive differentiator,” Risley explained. “When we started Architect Partners…it was really clear in my mind to focus and find our spot and be really deep and good at it.”



Emergents Managing Partner Elliot Chun said that Emergents has believed since 2019 that crypto, as an industry and an asset class, is positioned for transformational growth.&nbsp;



After the merge with Architect Partners, he added, the combined firm will better be able to connect with both crypto native firms, as well as traditional asset managers, corporations and other institutional investors transitioning to the space.



“That is where our teams can really fit today and going forward,” Chun noted in an interview with Blockworks.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“With all the tailwinds behind crypto, with all the tailwinds behind the various enterprise use cases that we’re seeing, it’s a great time to be making this move.”</blockquote>



<h3 class="wp-block-heading">Crypto M&amp;A activity accelerating</h3>



The merge, announced on Thursday, comes after crypto mergers and acquisitions accelerated in 2021 — tripling from 2020 levels, according to the firms, while capital raise transactions nearly doubled over that span.



One of the biggest deals of last year — excluding those involving special purpose acquisition companies (SPACs) — was <a href="https://cms.blockworks.co/galaxy-digital-acquires-bitgo-for-1-2b/">Galaxy Digital’s $1.2 billion purchase of BitGo</a>.



2021 also witnessed a new type of blockchain-based <a href="https://cms.blockworks.co/a-match-made-in-defi-rari-capital-and-fei-protocol-merge-to-feirari/" target="_blank" rel="noreferrer noopener">merger between DAOs</a>, one approved by governance token holders of Rari Capital (RGT) and Fei protocol (TRIBE).



Ryan McCulloch, an investment banking associate at Architect Partners, <a href="https://cms.blockworks.co/what-could-crypto-ma-look-like-in-2022/" target="_blank" rel="noreferrer noopener">previously told Blockworks</a> in an interview that he expects large financial companies to continue looking to buy crypto data providers, stablecoin issuers and digital asset firms focused on payments.



Chun highlighted the <a href="https://blog.hermez.io/polygon-hermez-merge/" target="_blank" rel="noreferrer noopener">merge of the Polygon and Hermez networks</a> last year, noting that he expects to see more of those types of deals in 2022.



Risley said Architect Partners plans to announce four closed crypto M&amp;A deals in the next six weeks, though he did not specify which companies were involved.



“Two of which are with the top one percent marquee names in the sector and all of which have massive strategic value,” he noted. “Most of the deals that we have within Architect Partners…are in the crypto sector, and we anticipate that will increasingly be the case and will become 100% at some point.”



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