Like any industry characterized by breakout innovation and extreme volatility, the cryptocurrency industry is experiencing a big moment. Venture capital was once the lifeblood of the industry. Now, that has cratered, ushering a terrifying new phase of consolidation and war room strategizing. In this article, we’ll take a look at that new M&A landscape. It looks at what’s driving this trend, what companies should consider strategically and what opportunities—and traps—lie ahead. It breaks down fruitful consolidations and provides practical guidance for operating in this fast-changing landscape.
The Current State of the Crypto Industry
The crypto market is based on speculative boom and bust cycles. These swings are propelled by innovation, changes in the regulatory landscape, and changing tides in investor sentiment. The problem is that the entire industry was enjoying a high-flying growth spurt. Now, it faces a different reality in terms of significantly reduced venture capital funding and increased scrutiny. This became the wake-up call for a large number of businesses who are now reassessing their business models and developing new approaches to achieve growth and sustainability.
Overview of Venture Capital Decline
This rapid expansion in the crypto industry was in large part thanks to venture capital (VC). It pumped much needed dollars into the development of cutting edge technologies allowing these small businesses to grow and hire. The tide has turned. From its high in 2021, venture capital in the crypto space has dropped more than 70%. Investors aren’t in a rush to make their moves. Now they want a ton more accountability and clearer routes to profitability, causing a drastic bottoming out.
Recently, venture capital inflows into the cryptocurrency space dropped through the floor. They dropped from a high watermark of $23 billion in 2022 to only $6 billion by 2024. This sharp decline highlights the lessened taste for risk by investors along with a return to fundamentals and concern for value. Yet the number of these funding rounds is down by nearly 50%. It dropped from 941 rounds in Q1 2022 to a mere 182 rounds in Q1 2025, signaling that investors are playing it safe with venture capital dollars. Median valuations are back to 2019-2020 levels too. The dramatic decrease in available funding has forced many companies to seek out new tactics to ensure their continued viability and expansion. Thus, both horizontal and vertical mergers and acquisitions have proven a popular option.
Implications of a 70% Drop in Funding
A 70% decrease in venture capital funding carries deep and far-reaching effects. That’s because it has a huge impact on most parts of the crypto industry. Startups that used to depend on VC cash to drive their expansion are suddenly in a world of hurt. As a result, hundreds are unable to hire new crews, furlough workers, or go out of business. All Hope Canyon’s become popular bridges to nowhere. This consolidation has resulted in an intense winner-take-all market, where only the largest, most creative and most financially agile companies will thrive.
The decline in funding affects innovation. With so much less capital available, companies have even less appetite to place risky bets on new and unproven technology. This negatively impacts the pace of innovation and discourages the development of transformative, game-changing solutions. It can lead to a deeper, more substantive, and more disciplined approach to innovation. Having more certainty around expected outcomes allows companies to focus their projects on those with a clear path toward commercialization.
The change in the funding environment has greatly impacted the state of the crypto market and altered its fundamentals. As the market retracts from some of the excess and speculative capital flowing into the industry, the market is becoming more rational and fundamentals-driven. Now, investors are more focused on measures like revenue, profitability, and user adoption. This moment has shifted the advantage to those companies with the best business models and management teams.
M&A Season in the Crypto Market
The crypto industry is in the midst of a toxic winter, with venture capital down 70%. Today, businesses find themselves in the M&A season, considering paths to either purchase turn-key answers or construct their own destiny. Mergers and acquisitions (M&A) are becoming increasingly common as companies look for ways to consolidate their market position, acquire new technologies, and expand their customer base. Three overarching factors propel this trend. Firms seek to realize synergies, expand geographically, and take advantage of the opportunity to buy mispriced assets.
The crypto industry experienced a huge uptick in M&A activity after 2020, reaching historic highs in both deal volume and year-to-date cumulative value in 2022. Although deal volume is not the complete picture, it very much reflects a robust appetite for strategic partnerships and acquisitions. Now, more than ever, companies are understanding and accepting how mergers and acquisitions can hasten their strategic goals. They perceive M&A as a quicker, more cost-effective substitute for organic growth.
Opportunities for Acquisition
Through divestitures or opportunities to acquire a new capability, the current M&A environment offers a wealth of possibilities for companies seeking to deepen or broaden their operations. Suppliers that have healthy balance sheets and a disciplined strategic focus are in the best position to capitalize on these opportunities. Potential acquisition targets could be those with complementary/new technologies, large customer bases, and/or extensive intellectual property.
In 2022, companies in the crypto space did everything they could to acquire one another. To enrich their trading ecosystems, they attacked the core of trading infrastructure — matching engines, custody systems, front-end interfaces. And global cryptocurrency exchange companies like Coinbase are working hard to purchase foreign cryptocurrency exchanges themselves to raise their international profile and market share. Coinbase plans to buy two or three foreign cryptocurrency exchanges in the next two years.
Some other possible targets are firms that focus on blockchain development, decentralized finance (DeFi), non-fungible tokens (NFTs), and Web3 technologies. These companies provide a much broader set of opportunities. Acquirers, too, have much to gain in improving their product offerings and expanding into new markets by partnering with them.
Building vs. Buying: Pros and Cons
For companies building tech today, the choice is more pivotal than ever. Or, instead — as an alternative — should they make them by swallowing the independently owned through mergers and acquisitions. Either approach has its own distinct advantages and disadvantages. Ultimately, the right decision depends on each company’s individual situation and long-term objectives.
The decision to build or buy depends on an internal analysis of their capacity to execute. Further, it needs to be in synch with the organization’s overall strategic priorities. Companies that feel they have the internal expertise and resources to develop their own solutions will often default to build. Firms that want to rapidly scale in a new market often find M&A to be their fastest path available. It helps them get the right technology faster while saving on their bottom line.
- Pros:
- Greater control over the technology and product development process.
- Ability to customize solutions to meet specific needs.
- Potential for greater innovation and differentiation.
- Preservation of company culture and values.
- Cons:
- Longer time to market.
- Higher development costs.
- Greater risk of failure.
- Requires significant internal expertise.
Beyond the usual shovel M&A, there are new, interesting ways for firms to weather this new crypto reality. Other tactics include strategic partnerships, joint ventures and tech licensing agreements. These non-traditional methods unlock new markets, technologies and expertise for these companies. They do all this without the need for a complete and formalistic acquisition.
- Pros:
- Faster time to market.
- Lower development costs.
- Access to existing technologies and customer base.
- Reduced risk of failure.
- Cons:
- Less control over the technology and product development process.
- Potential integration challenges.
- Risk of acquiring a company with hidden liabilities.
- Potential cultural clashes.
One surprising new strategy for achieving rapid, sustainable growth lies in reinforcing a broad and deep ecosystem of support around a single blockchain or emerging technology. This means collaborating with other stakeholders in the firm’s value chain to create synergistic offerings that drive the community’s overall ecosystem value. Through their efforts, corporations can help develop the rich and dynamic ecosystem. This brings more users and developers which fuels further growth and innovation.
Exploring Unique Strategies
The second is focusing on creating niche products and services. These products can serve important niches of the crypto marketplace. Giving consumers what they want provides companies with a unique opportunity to set themselves apart against competition and earn a loyal customer for life. Businesses can reap benefits through a niche competitive strategy. This specialization is what gives them the ability to be experts in that specific realm.
Innovative Approaches to Growth
Beyond just producing cleaner products, companies are looking for new ways to monetize their output and services. This ranges from providing pay-to-play premium features, pay-to-play subscription models, and revenue-sharing agreements. This helps companies cut their dependence on investors or other traditional funders by bringing in new revenue sources. We find that this strategy allows them to develop a more sustainable business model.
Successful crypto industry mergers provide important lessons. They illustrate wise planning and foresight of the essential elements that will likely influence a successful M&A deal. Far from the first transaction, these case studies demonstrate the importance of strategic alignment, cultural compatibility, and effective integration.
One recent example is the purchase of Xapo by Coinbase in 2019. Xapo was, and still is, a top name in secure bitcoin storage and custody. The acquisition enabled Coinbase to strengthen its institutional custody offerings and served as a major boost to its security infrastructure. What made this merger work was the engagement fit between the two companies. Second, and perhaps more impactful, was the successful blending of Xapo’s technology and team into Coinbase’s ongoing operations.
Case Studies of Successful Mergers
A second merger that should have had regulators’ antennae up was Galaxy Digital’s 2021 acquisition of BitGo. Galaxy Digital is a leading digital asset and blockchain financial services firm, while BitGo is a leading provider of digital asset custody and security solutions. The merger produced a powerful platform for institutional investors seeking to engage with the crypto market. This merger worked largely because the two companies’ businesses lined up like pieces of a puzzle. More than that, they communicated passion and a bold vision to develop a regulated, trusted, secure market for institutional investors.
Taken together, these case studies proved that successful mergers don’t just happen—they take planning, strategic alignment, and deliberate integration to succeed. Companies that take the time to understand the strategic goals of the transaction and address potential integration challenges are more likely to achieve a successful outcome.
Staying informed about the latest developments in the crypto industry is crucial for making informed decisions. Podcasts are a great, easy-to-digest way to learn about all new trends, technologies, and regulatory shifts happening within the industry. A number of these podcasts are useful resources that offer unique perspectives from industry leaders and visionaries.
Podcasts hosted by field professionals provide informative perspectives on the dynamic state of the crypto world. Beyond recapping the past year, they illuminate great opportunities and challenges that await us. From discussing the impact of new autonomous technologies to explaining how regulations are shifting, these experts will leave listeners with a better understanding of what decisions they should be making.
Podcasts Worth a Listen
These interviews with venture capitalists provide a window into their world. Perhaps even more interesting, they each reveal which companies and technologies are presently attracting investment. Conversations with crypto entrepreneurs help pull back the curtain on what it really takes to build a thriving crypto company. In-depth interviews with regulatory experts provide a fascinating look at the regulatory maelstrom. These discussions usually expose what the real impact to industry could become.
Recommended Crypto Podcasts
- The Pomp Podcast: Hosted by Anthony Pompliano, this podcast features interviews with leading investors, entrepreneurs, and thinkers in the crypto space. The podcast covers a wide range of topics, including bitcoin, blockchain, DeFi, and Web3.
- Unchained: Hosted by Laura Shin, this podcast explores the latest news and trends in the crypto industry. The podcast features interviews with industry experts and provides in-depth analysis of important topics.
- Bankless: Hosted by David Hoffman and Ryan Adams, this podcast focuses on the DeFi and Web3 ecosystems. The podcast provides insights into the latest protocols, applications, and trends in these emerging areas.
- What Bitcoin Did: Hosted by Peter McCormack, this podcast explores the world of Bitcoin with interviews from leading experts in the space. Topics range from the technical to the philosophical, providing a well-rounded perspective on Bitcoin.
Insights from Industry Experts
By listening to podcasts featuring industry experts, individuals can gain a deeper understanding of the crypto market and make more informed decisions about their investments and business strategies.
Bitcoin is the first and most recognized cryptocurrency, still accounting for over 40% of the whole crypto market. Whether you’re a hardcore Bitcoiner or just dabbling in this new crypto industry, knowing what’s going on out there in the Bitcoin ecosystem is key. The biggest recent development that has attracted even more than usual interest is the Bitcoin OP_RETURN war.
The much-maligned OP_RETURN opcode in Bitcoin provides a way for users to embed arbitrary data into the blockchain. This perpetual feature has since been leveraged for all sorts of things, from metadata storage, NFT creation, decentralized app development. Developments with OP_RETURN recently caused an uproar among blockchain experts. Critics claim that it just serves to bloat the blockchain and pulls focus from Bitcoin’s original intention as a peer-to-peer electronic cash system.
Understanding Bitcoin Season 2
The Bitcoin OP_RETURN war invites serious discussion about the implementation of OP_RETURN. That being said, this discussion does lead to important questions about what these changes could mean for the Bitcoin network. While some developers and users have sought to limit OP_RETURN or even remove it entirely, some people argue that it’s a great loophole that should be protected.
The Bitcoin OP_RETURN War Explained
This OP_RETURN debate with Draghi & co. just points to the larger, deeper conflict playing out between these competing visions of Bitcoin’s future. Others see Bitcoin largely used as a store of value and secondarily a censorship resistant payment system. The latter, others argue, is a great platform for building all kinds of decentralized applications.
The recent developments in the Bitcoin ecosystem, including the OP_RETURN war, provide several key takeaways for those involved in the crypto industry.
By understanding these fundamental lessons, readers will feel equipped to tackle the mysteries of the Bitcoin world. This understanding gives them the ability to best shape their investments and business strategies. The crypto M&A landscape is still rapidly changing, and understanding the new reality will be key to positioning yourself to make smart moves. The downturn in venture capital has increased chances for strategic mergers and acquisitions. Survey respondents agree that companies can no longer take their pick and develop a winning approach on the fly. By exploring unique strategies, learning from successful mergers, and staying informed about the latest developments in the industry, companies can navigate the current environment and position themselves for long-term growth and success.
Key Takeaways from Recent Developments
The content in this article should not be considered investment advice. It is important to conduct your own research and consult with a qualified financial advisor before making any investment decisions.
- The Bitcoin ecosystem is constantly evolving, and it is important to stay up-to-date on the latest developments.
- There are different visions for the future of Bitcoin, and these visions can sometimes conflict.
- The decisions made by Bitcoin developers and users can have a significant impact on the future of the network.
By understanding these key takeaways, individuals can better navigate the complexities of the Bitcoin ecosystem and make more informed decisions about their investments and business strategies. The crypto M&A landscape is constantly evolving, and staying informed is crucial for making informed decisions. The decline in venture capital has created new opportunities for strategic acquisitions, but companies must carefully evaluate their options and develop a clear strategy for success. By exploring unique strategies, learning from successful mergers, and staying informed about the latest developments in the industry, companies can navigate the current environment and position themselves for long-term growth and success.
The information provided in this article is for informational purposes only and does not constitute investment advice. It is important to conduct your own research and consult with a qualified financial advisor before making any investment decisions.
