Crypto M&A has reached an all-time high and it's not expected to stop surging any time soon

The number of merger and acquisition deals in the crypto market has hit an all-time high this year. And industry insiders don't expect the pace of deal-making to slow down any time soon. 

Data provided by Architect Partners shows that 126 crypto merger and acquisition (M&A) deals have occurred this year, more than double the count for 2020. In total, the average deal size in 2021 has been $629 million, according to Architect Partners.

"The market is certainly hot," said Ryan McCulloch, an analyst at Architect.  

That average is skewed somewhat by large special purpose acquisition company (SPAC) deals, which have swept the market. Crypto trading platform Bullish, for instance, is expected to tap the public markets via the acquisition deal at a valuation above $9 billion. Bakkt is expected to go public via a SPAC before the end of the year at a multi-billion valuation. 

But most of the deal activity has been concentrated in firms focused on crypto investing and trading. There have been 42 deals in that sector, followed closely by the mining and staking category, which saw 35 deals.

The larger trends reflect the maturation of the industry, which is also benefiting from record levels of private investment. The leading firms in crypto are now big enough to strategically acquire startups, as is common in other technology industries.

Hiring and acquiring

The surging market M&A market is reflected in recent hiring efforts. Trading firm Wintermute posted a job ad to LinkedIn for a director of venture investments and M&A. In March, prominent crypto investment firm Digital Currency Group (DCG) hired its first chief financial officer to focus on M&A opportunities. At the time, a spokesman told The Block: "We will continue to be opportunistic and expect to ramp up our M&A activities at both the DCG and subsidiary level."

As for the deals themselves, landmark examples thus far include Galaxy Digital's pending acquisition of BitGo, a deal that valued the custody-services provider north of $1 billion. And Coinbase, the publicly traded crypto exchange, has snapped up crypto infrastructure services provider BisonTrails and analytics firm Skew this year.

At Coinbase, the firm is preparing for M&A to continue to ramp up. Shan Aggarwal, head of corporate development and ventures, told The Block in an email that the current size of crypto firms make them more able to snap up other market players.

"Today, we have multiple publicly traded crypto companies and many that have scaled to be sizable businesses with strong balance sheets and plenty of investor interest to raise additional capital," he said. 

According to Aggarwal, M&A will serve as a "key lever" in Coinbase's growth. "Where we see teams that have built amazing products and share our vision, we celebrate it, and may seek to align ourselves through M&A."

UK-based Blockchain is another firm preparing for further consolidation in the crypto industry. Chief Business Officer Lane Kasselman told The Block in an email that he expects another 100 deals to close across the space in 2021. "10% of early-stage startups are focused on crypto and about 30% of them get acquired," he said. 

"If there are about 8,000 funded startups in 2021 — and 126 deals have already happened — we should see another 120-ish by EOY."