The New Wave of Mergers and Acquisitions in the Cryptocurrency Market

Coinbase acquired Deribit for $2.9 billion, the largest merger and acquisition event in cryptocurrency history.

The history of the tech sector is similar. To date, Google has acquired 261 companies. These acquisitions birthed products like Google Maps, Google AdSense, and Google Analytics. Perhaps the most significant was Google's acquisition of YouTube for $1.65 billion in 2020. By the first quarter of 2025, YouTube generated $8.9 billion in revenue, accounting for 10% of Alphabet (Google's parent company) (NASDAQ:GOOGL) 's total revenue. Similarly, Meta (NASDAQ:META) has made 101 acquisitions to date, with Instagram, WhatsApp, and Oculus being standout examples. Instagram generated over $65 billion in annual revenue by 2024, contributing over 40% to Meta's total business revenue.

Is it better to buy off the shelf or build it yourself?

The cryptocurrency industry is no longer new. It is estimated that the number of cryptocurrency users has reached 659 million, with Coinbase (NASDAQ:COIN) having over 105 million users, while the global number of internet users is about 5.5 billion. Hence, cryptocurrency users now account for 10% of total internet users. These figures are crucial as we identify the sources of growth for the next stage.

Expanding the user base is an obvious strategy for growth. Currently, we have only developed applications of cryptocurrency in the financial sector. If other applications take blockchain technology as infrastructure, the entire market size will expand significantly. Acquiring existing users, cross-selling, and increasing individual user revenue are some ways existing companies achieve growth.

When the pendulum swings towards acquisition.

Acquisitions solve three key issues that pure financing cannot address. In highly specialized fields where experienced developers are scarce, acquisitions help with talent acquisition. In an environment where the cost of natural growth is increasing, acquisitions aid user acquisition. Finally, acquisitions can facilitate technology integration, allowing protocols to transcend their original use cases. These issues will be discussed further in conjunction with industry cases.

We are observing a new wave of mergers and acquisitions in the cryptocurrency space. Coinbase acquired Deribit for a record-breaking $2.9 billion. Kraken closed a deal to buy CFTC-regulated retail futures trading platform NinjaTrader for $1.5 billion. Meanwhile, Ripple is acquiring multi-asset prime broker Hidden Road for $1.25 billion.

These transactions highlight the varying priorities of each company. Ripple is expanding its regulatory and distribution channels, Coinbase is seeking options trading volume, and Kraken is filling product gaps. Ultimately, these acquisitions arise from strategic, survival, and competitive positioning imperatives.

The table below can help you understand the considerations existing companies have when deciding whether to build or acquire.

While the table summarizes the key trade-offs in self-building versus acquisition decisions, existing companies often rely on unique signals when taking decisive actions. A good example is Stripe's acquisition of Nigeria's Paystack in 2020. Building infrastructure in Africa would have meant facing a steep learning curve in regulatory nuances, local integration, and merchant onboarding.

Instead, Stripe opted to acquire. Paystack had already solved local compliance issues, built a merchant base, and proven its distribution capabilities. This acquisition met multiple criteria for Stripe: speed (gaining first-mover advantage in a fast-growing market), capability gaps (local expertise and risk management), and competitive threats (Paystack potentially becoming a regional competitor). It facilitated Stripe's global expansion without diverting attention from its core business.

Before discussing the reasons behind these transactions, two questions are worth considering: first, why should founders consider being acquired; second, why is now an important time to consider this issue.

Successful acquisitions can serve as a booster.

Why is the current macro environment favorable to mergers and acquisitions?

For some, it is about liquidity at exit. For others, it is to access more durable distribution channels, ensure long-term growth, or become part of a platform that amplifies influence. For many, it is a way to avoid the increasingly narrow path of venture capital, which is becoming scarcer with higher investor expectations and time pressures.

A rising tide does not lift all boats.

The venture capital market lags behind liquidity markets by several quarters. Typically, whenever Bitcoin price peaks, venture capital activity takes several months or quarters to cool off. Venture capital in the cryptocurrency space has fallen more than 70% since its peak in 2021, and median valuations have returned to levels seen in 2019-2020. I believe this is not a temporary pullback.

Let me elaborate on the reasons. In essence, venture capital returns have declined, while the cost of capital has risen. Consequently, with a higher opportunity cost, the risk capital chasing deals has decreased. However, from the