Crypto derivatives exchange FTX has acquired popular crypto price tracking app Blockfolio for $150 million in one of the largest acquisition deals in the digital asset space this year.
Launched in 2019, FTX is known for quickly delivering new products to market for institutional traders, including a wide range of derivatives. The acquisition of Blockfolio will help the firm expand its footprint in the retail market, chief executive Sam Bankman-Fried said in an interview with The Block.
The acquisition deal spawned from early discussions between the two companies about ways they could collaborate on new products. Blockfolio was exploring how it could capture the value accrued in crypto trading.
"It started on that level, discussing what products we could collaborate on and it changed over the course of a few months," Bankman-Fried said.
The transaction was in the form of a mix of equity, FTX's native token and cash, Bankman-Fried said. He added that the deal was not the type in which the acquirer would pick apart the acquired company for scraps and offer a cash-out for the latter's founders, adding that FTX is committed to making Blockfolio "massively bigger." Already, Blockfolio has racked up 6 million users and sees approximately 150 million impressions per month.
"If you look at the billions of dollars and hundreds of millions of users on apps like Robinhood, Cash App, Paypal, Coinbase, etc., you can get a sense of the scale of growth that's not just theoretically possible but in fact achieved here," Bankman-Fried said. "And in the end, those are just examples, not the largest vision you could have for Blockfolio."
"We are getting everyone aligned and the team is going to grow after the acquisition," added Blockfolio co-founder Ed Moncada.
It's not exactly clear at this point how Blockfolio will fit under the broader FTX umbrella. FTX operates a retail-focused exchange in the U.S., FTX.US, and is working with crypto protocol Solana to build Serum, a decentralized exchange. FTX.US recently hired Robinhood's former head of crypto, Sina Nader — an earlier hint at its ambitions to grow that business.
"Without going too much into the gory details, the goal here is to be able to offer the best product that can leverage the loyal following that Ed has built out," Bankman-Fried said of the tie-up. "I think what that means is pulling out all the stops."
"That means giving access to Blockfolio to all of the entities we have and for each user, hooking them up with what fits them," he continued.
"[Blockfolio] is the entry point for a lot of folks to get into the ecosystem," said Paul Veradittakit of Pantera, an investor in Blockfolio, of the app's value-add as a property for FTX. "There are so many ways you can monetize the thing: from asset-management to information to even things like tax and things like that."
Still, the two companies are working on a unique retail trading feature to launch later this fall.
Latest major M&A deal
In a sense, the deal is similar to Binance's acquisition of CoinMarketCap, another data provider that brings in a large amount of retail traffic. Blockfolio could create a large top funnel for FTX to penetrate the retail market in a similar fashion.
Underpinning the deal is the narrative that the crypto market is going to see a wave of merger and acquisition (M&A) activity in the near term.
Several insiders in the market expect crypto M&A to accelerate even further.
"We've been doing this since the beginning of the space getting institutionalized," Veradittakit said. "Along the way, we have been able to feed into this theme of consolidation. I think that we are going to see a ton more consolidation in the space."
In an email to The Block, Galaxy's Chris Ferraro told The Block that it agrees M&A activity will pick up in the second half of 2020. Galaxy operates an advisory business that guides companies through such large transactions.
"M&A dialogue actually increased as we went into quarantine, driven by a combination of i) perception that the venture capital environment will be constrained for the foreseeable future, and ii) the larger cap end of the sector, which was already starting to make strategic moves, seeking to press that access to capital advantage," Galaxy's Ferraro said.
Galaxy and Spartan Group served as M&A advisors to Blockfolio on the transaction. FTX relied on internal legal and corporate development personnel in structuring the deal.
Disclosure: Pantera is an equity investor in The Block.
Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.
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