Bear Market & Business Failures Driving M&A Surge in Crypto Space

According to Needham’s senior research analyst John Todaro, valuations of public crypto companies have fallen about 70% this year. The sector’s also in the midst of a crypto crash, which has wiped out around $2 trillion in value over the past few months, meaning crypto companies are cheaper now a year ago when the sector was in full recovery.

Voyager Digital, the lender whose bankruptcy deepened this year’s crypto market crisis, is attracting interest from some of the biggest players in the space, including exchanges Binance and FTX. FTX and Ripple Labs still have M&A in the pipeline for 2022 but WonderFi Technologies Inc (TSX:WNDR) (OTCQB: WONDF) was one step ahead when earlier this year it acquired Bitbuy and Coinberry, two of Canada’s six registered crypto trading platforms.

Hut 8 Mining (NASDAQ: HUT) (TSX: HUT), CleanSpark (NASDAQ: CLSK), Galaxy Digital (TSX:GLXY), and Riot Blockchain (NASDAQ: RIOT) are also making acquisitions or looking for interesting deals in the crypto space.

WonderFi Technologies Inc (TSX: WNDR) (OTCQB: WONDF) is a technology company providing greater access to digital assets through centralized and decentralized platforms. On July 4, the company completed its previously announced acquisition of Coinberry, one of Canada’s leading crypto asset trading platforms registered with the Canadian Securities Administrators (CSA) and the first pure-play licensed crypto broker in Canada.

WonderFi CEO Ben Samaroo said the acquisition further solidifies WonderFi as a leader amongst crypto companies in Canada, and along with its acquisition of Bitbuy, establishe the foundation for its expansion into global markets. "The crypto market downturn has had a massive impact on the viability of unregulated crypto trading platforms and WonderFi’s value proposition as one of the few regulated crypto businesses makes us well positioned to continue our growth."

With this acquisition, WonderFi became the first company in Canada, and one of the few worldwide, to own and operate multiple licensed crypto asset exchange platforms regulated by applicable securities commissions.

Coinberry added over 225,000 users and $99.5 million in client assets in custody as of March 31, 2022, giving the WonderFi group of companies over half a billion dollars in approximate total client assets under custody as of the acquisition.

WonderFi plans to realize significant cost synergies by integrating a variety of functions across its Coinberry and Bitbuy operations, developing cross-selling services and enhancing the user experience by continuing to innovate its suite of product offerings.

WonderFi had previously announced a partnership with the Meta Venture Capital Partnerships team, a division of Meta Platforms, Inc.

In order to help the most innovative firms scale, Meta Partnerships was founded in 2020. Its goal is to connect them with Meta’s resources and brands, like Facebook and Instagram. WonderFi will receive strategic guidance from Meta Partnerships on matters such as marketing, performance, and business scale, as well as on collaborative strategies with other Meta departments and privacy-related regulations.

Crypto Companies Are Actively Pursuing Acquisitions

And WonderFi isn’t the only crypto company looking to expand its stake in the market through mergers and acquisitions.

Earlier this year, Hut 8 Mining (NASDAQ: HUT) (TSX: HUT) a leading innovator in digital asset mining in North America, closed its definitive agreement to acquire TeraGo Inc.’s cloud and colocation data centre operations.

The acquisition comprises a comprehensive information technology solution that includes a full range of scalable cloud services, increased operations out of five data centres across Canada, and other related items. Hut 8 becomes a top high-performance computing platform as a result of the acquisition, giving the company a distinct position within the ecosystem for digital assets.

On August 19, America’s Bitcoin Miner CleanSpark (NASDAQ: CLSK) announced that the deal to buy an active bitcoin mining plant in Washington, Georgia has closed.

Once all 86MW of primarily carbon-free power is completely operational in 2023, the plant is anticipated to increase CleanSpark’s hashrate by 2.6 EH/s. Since Bitcoin mining improves grid resilience for nearby communities like Washington, Georgia, it is crucial to CleanSpark’s ESG obligations.

About 20 additional employees will be hired by the company as part of the facility expansion, the majority of whom will be residents of Washington and the neighbourhood. On September 8, CleanSpark will have an open house at the new location for interested residents, members of the local press, and community leaders.

Still, not every crypto company is moving forward with M&A plans. On August 15, Galaxy Digital (TSX:GLXY) announced that it had used its right to end its previously publicized acquisition agreement with BitGo because BitGo had failed to submit audited financial statements for 2021 by July 31, 2022, as required. There is no termination charge associated with the termination. After completing the SEC assessment, Galaxy Digital plans to carry out the proposed reorganization and domestication to become a Delaware-based business and then list on the Nasdaq.

Riot Blockchain (NASDAQ: RIOT) reported total revenue of $72.9 million for the three-month period ended June 30, 2022, an increase of 112% from $34.3 million for the same three-month period in 2021.

Mining revenue increased 47% to $46.2 million in Q2 2022, from $31.5 million for the prior-year quarter, due to an increase in the number of BTC mined. Riot reported data center hosting revenue of $9.8 million for the three months ended June 30, following the acquisition of Whinstone US in the second quarter of 2021. Engineering segment revenue was $16.9 million in the quarter, following the acquisition of ESS Metron in the fourth quarter of 2021.

Riot increased BTC production quantity by 107% to 1,395 BTC in Q2 2022, from 675 BTC in Q2 2021. The company raised $267.0 million in net proceeds from the sale of approximately 30.6 million shares of Riot common stock through our previously announced stock offering, further strengthening Riot’s industry-leading financial position, in difficult market conditions for the sector.

WonderFi Technologies common shares started trading on the OTCQB® Venture Market on August 17, 2022. The company has also submitted an application to list its common shares on the Nasdaq Capital Market (NASDAQ).