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Institutional investors, venture capitalists, and other well-heeled entities âin the knowâ are using a year-long bear market to buy up future technologies for what might turn out to be pennies on the dollar.
It Takes Money to Make Money
Yesterday CNBC reported that most of  2018 has been a âdeal frenzyâ for cryptocurrency and blockchain-related companies as mergers and acquisitions (M&A) are reported to have increased by 200 percent. Pitchbook had JMP Securities crunch M&A data the results showed that by the end of 2018 there will have been 145 M&A deals.
The data is inclusive of majority investments, partial and full acquisitions but it does not pinpoint the exact dollar amount spent for each deal. JMP did mention that most of the M&As are ârelatively smallâ as the sum is less than $100 million. The uptick in M&As took place as Bitcoin declined to trade nearly 53% below its January price.
Interestingly, buyers did not appear deterred by Bitcoinâs fall from $20,000 in January as the $830 billion dollar market capitalization began to disintegrate. In fact, according to Satya Bajpai, the head of blockchain and digital assets investment banking at JMP Securities, âYouâre seeing a mispricing of assets.â Bajpai believes that the majority of crypto-startups have token values that âremain correlated to Bitcoinâ and this phenomenon âcan create an ideal opportunity for strategic acquirers.â
Crypto is an Investors Smorgasbord
Bajpai used the analogy of a âland grabâ when describing how the rapid pace of growth and innovation in a new sector compels investors to buy up technology producers instead of attempting to build their own platform. Bajpai explained that â[The M&A route is] expensive, but you get the technology and product immediately. This industry is like a treadmill â the only way to keep up on a treadmill is to keep running by investing in new technology.â
The Ends Justifies the Means
Bajpai also pointed out that hasty acquisitions come with significant risks as a number of the companies scooped up during mergers and acquisitions are startups in infancy and have yet to prove themselves. Nonetheless, the uptick in mergers and acquisitions shows that many investors are willing to look past these issues as the potential for future returns could far outweigh these risks. Â
What do you think about venture capitalists and institutions purchasing crypto-startups? Share your thoughts in the comments below!Â
Images courtesy of JMP Securities, Shutterstock.
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The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.