2022 M&A Outlook, DeFi Goes Blue-Chip, & The BTC Inflation Hedge?

January 5, 2022 | Issue #202

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2022: The Year of Crypto M&A and IPOs?

2021 was an impressive year of crypto exits.

According to Architect Partners, M&A deals involving at least one company in the crypto sector totaled 174 in 2021, compared to 59 deals in 2020.

These included:
  • Galaxy Digital’s $1.2 billion purchase of BitGo
  • Kraken's acquisition of Staked
  • Polygon's Acquisition of Mir In $400M Deal
  • Northern Data’s $575 million acquisition of Bitfield
  • Siam Commercial Bank’s purchase of Bitkub for $537 million
And all signs are pointing to 2022 significantly exceeding 2021. Let's take a closer look...

M&A in 2022
In 2021, we began to see an increase in M&A between traditional finance and crypto companies such as PayPal buying Curv and Robinhood buying Cove Markets. This trend is expected to accelerate as traditional companies begin to realize they need more exposure to the space. Not only that, but non-financial companies will begin to pay up for crypto exposure, as highlighted by Nike acquiring NFT company RTFKT.

According to Ryan McCulloch of Architect Partners, he also expects to begin seeing banks partnering or acquiring stablecoin providers as well as data providers. In 2021, Mastercard bought CipherTrace and Cboe Global Markets agreed to buy ErisX to become more competitive.

IPOs in 2022
If 2021 was the year of Coinbase's IPO, 2022 will be the year of the competitors.

Kraken, which is the fourth largest exchange by volume, has previously raised money at a $10 billion valuation, with secondary shares changing hands at ~$20 billion. CEO Jesse Powell has stated that he hopes the company will go public in the second half of 2022.

FTX, which is the third-largest exchange by trading volume, is profitable and doesn't necessarily need to go public in 2022, but just may. Recent funding rounds value the company at $32 billion, and the company's US arm at $8 billion.

Other companies that may bite the bullet include NFT platform, OpenSea, which raised money at a $13.3 billion valuation and wealth management and trading firm, BlockFi, which recently raised $500 million at a $4.75 billion valuation.
 

Bitcoin's Market Dominance Continues To Shrink

Bitcoin’s market dominance – the ratio between BTC’s market capitalization and the total crypto market cap – continues to sink as investors look to other cryptos.

Right now it stands at ~37% – the lowest since 2018.

While some call BTC market dominance a pointless statistic (after all, new tokens are eating away at the total market cap seemingly every day) we do find it interesting that BTC dominance is shrinking at a time when the overall markets are shifting away from high-multiple growth and back to value.

If the fecal matter were to really hit the fan for the stock market, will BTC dominance creep back up? Or will the masses of crypto still try to chase higher-risk, higher-reward altcoins?

Now's the time to ask yourself whether you are a short-term or a long-term investor.
 
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 DEEP DIVES 

Crypto’s Biggest Storylines Going Into 2022

All right, enough of the 2021 reviews, hot takes, and 2022 predictions – let's get back to business and refocus a bit...

Here's an easy-to-understand piece from Coin Metrics that outlines the most important trends and storylines for investors to keep in mind as we head into the new year.

Because while mainstream media does an excellent job of covering what's trendy in the world of crypto (NFTs, DOGE, DAOs, etc.)... oftentimes they completely miss the mark on the more important narratives for common investors.

Eminem paid how much for a Bored Ape? So what. We'd personally rather keep tabs on, as Coin Metrics points out, how BTC will combat inflation and its correlation to the S&P... the progress of ETH 2.0... lower gas fees... and perhaps the biggest elephant in the room in terms of risk, regulation.
 
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2021 was a bonkers year for alternative assets. From wine, to sneakers, to video games, the world finally realized that stocks aren't gonna go up forever, and it's smart to diversify into alternatives.

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 REGULATORY FRONT 

China Speaking From Both Sides Of Its Mouth

This week, a pilot version of e-CNY, the mobile wallet for China’s digital yuan, went live on iOS and Android app stores in China (see images here).

The digital yuan is a so-called Central Bank Digital Currency (CBDC) — a kind of cryptocurrency issued and controlled by the government of a nation state. The developer of the e-CNY app is listed as the People’s Bank of China’s Digital Currency Research Institute, an offshoot of China’s central bank.

While many countries around the world are investigating CBDCs (Jamaica just announced theirs), China has seized an early lead in the technology and it seems they really want to bring it to the world stage just in time for the Olympics.

Meanwhile, China’s official Xinhua News Agency will issue its first series of NFTs, which is puzzling since this is the same country that just recently banned BTC and ETH mining and wants to track the metaverse and other NFTs.
 

The Number Of Countries Banning Crypto Has Doubled In Three Years

A report by the Library of Congress (LOC) shows 9 jurisdictions that have now applied an absolute ban on crypto and 42 with an implicit ban. This is up from 8 and 15, respectively, in 2018 when the report was first published.
 
 TWEET OF THE WEEK 

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