PwC Report: Mergers and Financing in the Crypto Industry Saw a Significant Decline in 2019, Likely to Continue into This Year

The performance of Bitcoin and the cryptocurrency market last year was impressive. Bitcoin reached $13,770 in June, indicating a strong comeback from the bear market of 2018. However, research reports show that in 2019, both mergers and fundraising in the cryptocurrency sector were not as strong as in 2018, with a 76% decrease in total acquisition value.

• Total acquisition value in the cryptocurrency sector decreased by 76% compared to 2018
• The ripple effects of the coronavirus continue to impact the cryptocurrency market

Data Shows Decline in 2018 Compared to 2019

According to a report released today by PricewaterhouseCoopers (PwC), one of the Big Four accounting firms, the number and total value of fundraising and M&A deals related to cryptocurrency both declined last year. The total value of M&A deals dropped from nearly $1.9 billion in the previous year to $451 million in 2019 (-76%), while the total fundraising amount decreased to $2.24 billion (-40%).

Henri Arslanian, Global Crypto Leader at PwC and one of the authors of the report, mentioned in an interview:

I believe we should expect some industry leaders to continue to grow, but not necessarily by acquiring their direct competitors. Not through vertical integration, but through horizontal expansion. Crypto unicorns are becoming more like octopuses, seemingly having their tentacles in various areas of the crypto ecosystem.

Note: Vertical integration refers to a company acquiring businesses in its upstream or downstream relationships; horizontal integration means a company acquiring institutions at the same level or with similar characteristics.

The report indicated that for the first time, fundraising and M&A transactions outside the U.S. exceeded 50% last year. Data showed that the Asia-Pacific region accounted for 29% of transactions, while Europe, the Middle East, and Africa made up 22%, and the U.S. dropped to 48%, below 55% in 2018.

Impact of Coronavirus Outbreak

The cryptocurrency sector has also been affected by the volatility brought on by the coronavirus outbreak this year, along with other macroeconomic events. Henri Arslanian stated:

The cryptocurrency industry has not been immune to the impacts of various unfavorable factors in the global economy, and the volume and total value of cryptocurrency-related fundraising and M&A transactions may also be affected in 2020.

Arslanian concluded, "We hope to see more family offices from the Asia-Pacific, Europe, the Middle East, and Africa regions view the current market turbulence as an opportunity to invest in quality crypto institutions."