Crypto Is Still Too Nascent for Mass M&A, but Consolidation Is Accelerating
As institutional interest grows, strategic acquisitions are paving the way for crypto’s next phase of consolidation.
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Topics Covered
Private Equity Crypto Interest
Corporate M&A by Crypto Giants
Bringing Web2 to Web3
Full Analysis📝
The cryptocurrency space has matured and has become more sophisticated over the years. Venture capital investment into blockchain technology has been underway for some time. However, it appears that there has recently been an increase in M&A activity in the crypto space.
Earlier this year, Stripe acquired Bridge, a stablecoin payment platform. It is the largest crypto acquisition to date and demonstrates Stripe’s willingness to enter the growing stablecoin market.
More Web2 firms like Stripe are taking steps to compete in key narratives, like stablecoins.
Additionally, as crypto becomes more accepted and explored as a viable asset, more companies will look to be involved in the crypto space. Existing companies involved in crypto like Robinhood look to make acquisitions to expand their crypto market share.
Existing companies in crypto will continue to leverage acquisitions to stay ahead of the competition, while new Web2 entrants will make acquisitions to enter the space.
One company in the crypto industry that has been significantly active in the M&A realm has been Chainalysis. The firm recently acquired both Alterya and Hexagate in the last 30 days.
For context, Chainalysis has secured over half a billion dollars in funding during its 11-year company lifecycle.
The larger companies in the crypto space will likely follow suit in acquiring smaller companies as they push to add to their product suites and/or penetrate new markets that will ultimately drive revenue.
Companies like Chainalysis will likely be looking to exit so new revenue streams make them more appealing for acquisition prospects or for entering the public market with an anticipated crypto surge with the arrival of the new Trump administration.
Additionally, in every crypto cycle, new trends emerge. The intersection of Web3 technologies and AI is a big topic. AI is a major point of focus for the Trump administration as seen by the 500 million dollar USD commitment made by SoftBank, OpenAI, and Oracle.
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In a positive regulatory environment for crypto, it is imaginable for M&A activity to increase, especially for that sweet spot of the intersection of AI and Web3.
In Web2, private equity firms like Vista Equity Partners are able to acquire software companies and then “flip” them for a significant profit.
However, the crypto market is still only 16 years old and is a new market relative to other software products. Despite this, the industry has seen traditional PE investors dabble into the crypto markets.
For example, KKR invested in Securitize, a platform specializing in tokenized securities.While the renowned firm didn’t acquire Securitize, its investment signifies the positive perception the firm has of tokenized assets.
There have been other examples of firms like Hamilton Lane and Partners Group who have tokenized their funds, but web3 appears to still be too nascent for these firms to have buy out strategies.
As we observe this trend of acquisition within the crypto industry, it's worth noting that venture capital exits have significantly decreased since their peak in 2021, as highlighted by Santiago R. Santos.
He mentioned, "VC exits are down massively since 2021. This trend of acquisition within the crypto industry’s venture capital exits have significantly decreased since their peak in 2021…VC exits are down massively since 2021. The aggregate value of the 2,040 exits in 2021 totaled $841.5 billion - almost 6X the number posted in 2024".
This shift could be steering investors towards M&A as a more viable strategy for realizing returns, especially in a market where IPOs like those of UiPath, Rivian, and Coinbase have not all maintained their initial valuations.
This scenario provides a fertile ground for both Web2 and crypto-native companies to explore acquisitions to strengthen their positions or enter new markets. It’s inspiring for crypto that Coinbase is the only one who is currently trading above that price.
Building on this trend, Santiago R. Santos has introduced his new venture, Inversion Capital, which brings a unique value proposition to the crypto M&A landscape. Inversion Capital plans to acquire and transform traditional businesses that can benefit from business model transformations by adopting crypto mechanisms. As a betting man, it seems like Inversion aims to attract private equity partners familiar with Web2 businesses, utilizing Web3 mechanisms to scale these traditional enterprises beyond standard private equity strategies.
By transitioning traditional businesses to Web3 models, Inversion can enhance scalability and efficiency, making these companies more attractive for resale to private equity firms accustomed to Web2 operations. This strategy not only modernizes the businesses but also aligns them with emerging technological trends, potentially increasing their market value.
The evolving crypto landscape presents opportunities for both traditional and crypto-native investors. While venture capital exits remain slow, M&A is emerging as a key strategy for liquidity and growth. Private equity firms that once hesitated are now exploring crypto-native acquisitions, and companies like Inversion Capital are bridging the gap between Web2 and Web3. If this trend continues, crypto M&A may not just be a passing phase—it could become the dominant framework for scaling and institutionalizing the next wave of blockchain innovation.
Excellent article! Thank you for keeping me current in this always evolving blockchain and crypto landscape.