How cryptocurrency works and scales globally
Cryptocurrency is an encrypted data string that represents a unit of currency, monitored and organized by a peer-to-peer network called blockchain, which also serves as a secure ledger of transactions. The logic behind cryptocurrency is creating an open network without the barriers of physical borders. These networks are not controlled by governments and are therefore considered decentralized. Well-known examples include Bitcoin, Ethereum, Tether, and Binance Coin. Cryptocurrencies enable faster cross-border transactions at a lower cost compared to traditional banking, and as they become more accepted they have shifted from a means of investing to a popular payment solution.
Rising M&A activity in cryptocurrency companies
Big trading companies are making strategic investments to acquire startups and strengthen their positioning in the fintech industry. According to PwC, the total value of global crypto M&A deals increased from $1.1 billion in 2020 to $55 billion in 2021. Recent examples include Betterment acquiring Makara, Coinbase buying FairX, and OpenSea buying Dharma Labs.
Crypto issuance surge and ICO market growth
Many big fintech firms are stepping into creating their own virtual currencies. For example, Meta explored a digital token for users to spend on its platforms. Within the first four months of 2022, there were over 6,800 Initial Coin Offering deals, including LuckyBlock, Decentraland, SafeMoon, and others.
Debunking key cryptocurrency misconceptions
Although cryptocurrency is gaining popularity, many misconceptions scare off potential consumers. The most common myth is that cryptocurrency is only used by money launderers, but in fact it has shown its potential to solve traditional banking problems. According to Tony Lees, Chief Product Officer at Wirex, a common misconception is that cryptocurrency is overly complicated, but spending crypto at the point of sale means anyone can hold and spend it without worrying about conversion rates. He notes huge benefits including lower fees, faster payments, and cheaper cross-border transactions.
Cybersecurity risks in crypto trading platforms
While cryptocurrency is becoming more accepted, cybersecurity is a big controversy in the decentralized asset industry. Consumers are most concerned with volatility, then the safety and reliability of trading platforms. It is important to trade on platforms that are licensed and regulated. The Better Business Bureau reported crypto scams as the second-riskiest type in 2021. Blockchain is considered nearly unhackable, but many endpoint trading platforms are far less secure, and third-party vendor security is comparably weaker, giving hackers chances to steal money. Many platforms are now building stronger cloud infrastructures to protect data and privacy.
How crypto adoption is shaping M&A strategy
Cryptocurrency will allow people to build a more open financial system and is now used by some governments in cross-border transactions. The trend of adopting cryptocurrency is popular and will be increasingly adopted by the mainstream in the near future.
M&A advisory for crypto, fintech, and AI
Mergers and acquisitions have become extremely active. Many private equity groups and industry strategics are supplementing their own M&A teams by finding firms that specialize in deal sourcing and origination, such as 733Park, backed by over 25 years of experience and relationship building. Contact us to get started.
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