Technical Considerations Amid the Explosion of Crypto Acquisitions and Public Listings
The second quarter of 2021 has been one of tremendous activity for cryptocurrencies, including recent price volatility. Coinbase’s (NYSE:COIN) direct listing—at a valuation of $99.6b—was the highlight event, becoming the seventh largest IPO in U.S. history. Additional deals and IPO announcements added to the flurry of activity, including eToro, Bakkt, CompoSecure and Galaxy Digital’s recent acquisition of BitGo (in which FTI Consulting served as a financial and technical advisor).
In a recent article in Mergers and Acquisitions, a director of fintech investing at a boutique investment banking firm was quoted saying, "There is greater appetite for acquisitions, which is matched by an ability to pay for assets among established players." Alongside an uptick in M&A, FTI Technology has seen an increase in demand for technical and competitive analysis to help clients in the crypto sector, fintech and banking identify gaps in the marketplace and understand the long-term outlook and risk of their product portfolios and crypto industry investments.
In addition to IPO and M&A moves, digital asset research firm The Block reported that 2021 will see the most private funding in cryptocurrency to date. This has begun to play out, with the first quarter of 2021 accounting for more deals than both 2020 and 2019 combined, with more than half of the funds going to players in the financial services sector. Fundraises include a $15 million Goldman Sachs investment into crypto data firm Coin Metrics and Bitski’s $19 million Series A round led by Andreessen Horowitz, Jay-Z and other investors, to support growth for its non-fungible token (NFT) platform.
Financial industry adoption has also picked up, with PayPal, Venmo, MasterCard and Morgan Stanley joining the ranks of organizations beginning to incorporate some cryptocurrencies into their payments and transactions offerings. As with any emerging space, there’s been a fluid mix of early adopters, detractors and other influences impacting the market and the acceptance and use of various currencies within it.
While time will tell whether mainstream adoption will ultimately play out, organizations looking to get into this space need to expand on their traditional due diligence processes. This includes conducting technical assessments and analyzing target or partner companies to determine any underlying red flags or inaccuracies in their cryptocurrency assets, frameworks and/or business models.
I wrote about the importance of technical assessments in cryptocurrency deal making and investing in a recent CoinTelegraph article. Read more here.
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.