The cryptocurrency industry’s struggles to attract mainstream investment continued last year as global fund raising and deals both dried up, according to a new report from PricewaterhouseCoopers.
Both the number and value of cryptocurrency-related fund raising and mergers and acquisitions sank last year, led by a 76% collapse in M&A value, to US$451-million in 2019 from almost $1.9-billion the year before. The amount of funds raised sank 40%, to $2.24-billion.
Crypto stalwarts have long predicted explosive growth for bitcoin and the wider industry once mainstream institutional money started flooding into the space. That did not happen last year, even as the largest digital currency emerged from its “crypto winter” to briefly trade around $13 000.
“The rise in the price of bitcoin in Q2 and Q3 2019, and the associated interest in crypto assets did not yet materialise by way of increased new capital into the industry,” the report said.
Non-US fund raising and M&A accounted for a majority of deals for the first time last year, according to PwC. Asia-Pacific was the source of 29% of such activity, while Europe, Middle East and Africa (Emea) accounted for 22% as both regions posted increases, its data showed. The US dropped to 48% of the total, down from 55% a year ago.
The cryptocurrency space will also be affected by volatility from the coronavirus outbreak and other macroeconomic events this year, according to the report.
Consolidation
“The crypto industry is not immune to the global headwinds and the number and value of crypto fund-raising and M&A deals may be impacted in 2020,” said Henri Arslanian, PwC global crypto leader and one of the authors of the report.
Traditional and crypto-focused venture capital funds, incubators and family offices remain the majority source of funding, the report added. Consolidation is also the biggest driver of M&A in the industry, with nine out of the top 10 deals strategic in nature and driven by other crypto companies or digital currency-focused funds, it said.
“We expect to see more Asia-Pacific and Emea-based family offices looking at the market turbulence as a good time to invest in promising crypto companies,” the authors wrote. “We expect to see further consolidation in 2020.” — Reported by Eric Lam, (c) 2020 Bloomberg LP