Is Crypto Back on Track? Valuations and M&A Show Promise Despite Recent Troubles

In the Brief:

  • Blockchain companies and crypto miners prove industry's viability with long-term performance
  • Valuations now align with tech industry, signifying maturity
  • Financial investors still active in market, with M&A and VC investments high
  • Blockchains and exchanges are crypto world's engines
  • Despite recent crises, specialized private investors and M&A will support valuations for valuable investment opportunity
  • Traders balance portfolios between safe anchors and volatile crypto, watching subsectors like security platforms.

3 - 6 minute read

Cryptocurrency has been receiving a lot of negative attention in the media given recent events such as the collapse of FTX back in November and runs on crypto-friendly banks in March. These situations have sparked debates around the credibility of the entire asset class. However, when taking a closer look at the long-term performance of blockchain companies and crypto miners, doubts are mitigated, and the industry’s viability is reinforced. Mining-based altcoins such as Canaan, Marathon Digital, Riot, and Hive are performing dismally compared to the Nasdaq Composite Index. However, if we examine the wider picture, miners outperform the Nasdaq from 2020 to 2023, whereas blockchain companies follow the Nasdaq trend.

This article examines the reality and details of the crypto mining and blockchain sector, providing valuable insights for crypto investors. One aspect that stands out for investors is that valuations in the crypto space have converged to the rest of the technology industry, suggesting maturity in this asset class’s development.

Financial investors have remained active in the cryptocurrency market, as evidenced by its M&A activity. For instance, notable M&A deals closed in the fourth quarter, including Gleec BTC Exchange acquiring Blocktane for $1.5 billion, Binance buying TokyoCrypto for $225 million, and Bankless purchasing Earnifi for $150 million. Statistically, there were 2,541 venture capital (VC) investments totaling $26.2 billion into crypto or blockchain companies in 2022.

The mining group in the crypto market experienced its largest metric rebound since the beginning of 2022, coinciding with bitcoin’s (BTC) price rally. The blockchain group had a similar trendline inclined with Nasdaq, but with less variability. VC investment and M&A activity are still high in the crypto world, making it an abundant market for investors.

Blockchain tech companies and exchanges remain the engines of the crypto world that all retail and institutional investors should focus on. For instance, Bakkt, Block, Coinbase, and PayPal offer a lot of advantages for investors. PayPal has shown that it can take on big players such as Visa and Mastercard, while Block and Coinbase have shown incredible resilience over the years, even during the most challenging times, delivering strong user growth and progress.

In summary, cryptocurrency remains a valuable investment for all levels of risk-takers looking for new opportunities. It may carry some risk considering its rapidly changing markets, but the fact that valuations for crypto-related companies have converged with the rest of the technology industry is a clear sign that the digital-asset industry is maturing. Despite the recent crisis that pruned out non-viable players, specialized private investors and M&A activity will continue to support valuations.

The Bottom Line

The crypto mining and blockchain sector continues to be a growing industry, and investors should take note of its prospects. Traders should carefully balance their portfolios between safe anchors such as the Nasdaq Composite Index and the highly volatile crypto space, depending on their risk appetite. Furthermore, traders should be mindful of crypto subsectors such as blockchain security platforms because they offer solutions to protect digital assets like crypto. The crypto industry’s valuation has converged with the rest of the tech world, suggesting maturity is in progress. Valuations will be supported by specialized private investors and M&A activity driven by consolidation plays at the international level, either by geographic or technology consolidation. Therefore, traders can expect continued opportunities in the sector.

Disclaimer: The content in this article is provided for informational purposes only and should not be considered as financial or trading advice. We are not financial advisors, and trading carries high risk. Always consult a professional financial advisor before making any investment decisions.

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