THE DECLINE IN THE ONCE-HOT MARKET MAY MAKE IT RISKIER FOR NEW ENTRY
From 2022, the implementation of crypto agreements was hot as companies sought to participate in the developing industry. So far this year, there have been 42 announced acquisitions of crypto-related companies, a speed that could exceed 60 deals last year, according to Dealogic.
But almost two months have passed since the final agreement was announced, a time that coincides with the collapse of digital assets and suggests that some companies may find it difficult to reach or complete consolidation until markets are clear. Among the firms that could be caught in an uncomfortable situation: Mike Novogratz bank of crypto merchant, Galaxy Digital Holdings Ltd., who agreed in the spring of 2021 to buy a crypto-custody specialist BitGo in a deal that has not been closed.
Some promoters have charged bitcoin and related assets such as resistance to inflation and which can often be associated with other risky markets, such as stocks and other bonds. But the scope of the 2022 market has stifled those claims, and adds to the effect of the Federal Reserve's drive to reduce inflation by raising interest rates. Bitcoin fell by two-thirds from a high last year, compared to a 22% decline in the S&P 500 and a 86% decline in crypto-currency trading Coinbase Global Inc.
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In the meantime, some investors in the crypto-related sectors remain loyal, arguing that the market is volatile and that companies that offer the highest value over the long term can survive beyond the current downturn. Some say they are preparing for what they expect to be a strong time to invest cheaply if the downtrend stops.
"I expect the value of M&A to increase as companies with strong balance sheets look to acquire crypto firms with valuable assets or intellectual property and weak balance sheets," said Kevin Kang, who helps run BKCoin Capital LP, a New York crypto hedge fund fund. . .
Six previously announced deals are pending closure, Dealogic said, with some investors questioning whether they will reach the finish line. In May 2021, for example, Mr. Galaxy Digital Novogratz agreed to buy crypto-custody specialist BitGo for $ 265 million and shares in Galaxy.
Once completed, the agreement promises to make Galaxy a leading player in the competition to attract institutional and individual investors. But Galaxy has already delayed the closure and increased the promised shares for BitGo owners.
Activity depends on Galaxy listing its shares in the Nasdaq trading. But Galaxy is still in talks with the Securities and Exchange Commission about the approval of its restructuring plan as a Delaware company and writes on the Nasdaq list, according to people close to the matter.
"We will be optimistic and will continue to engage with the SEC," Mr Novogratz said in a conference call with shareholders in late March.
Galaxy and BitGo declined to comment.
But some investors say the turmoil in the crypto world could make it even more difficult to negotiate with others.
"They have delayed it a few times now and the terms of the agreement say it should be closed by the end of 2022," said Eric Jackson, founder of EMJ Capital Ltd., a Toronto hedge fund fund.
Mr. Jackson is a BitGo fan and says Galaxy shares are attractive, especially when acquisitions pass. But he notes that Galaxy shares, about 67% down last year, cost about $ 2 billion, not much more than BitGo's $ 1.2 billion value in the deal.