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CZ: Big crypto exchanges will increasingly buy smaller ones in the Asian market

on Apr 13, 2020
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  • Binance’s Changpeng Zhao says increasing crypto M&As will defragment the Asian market.
  • Volatility in the crypto space triggered the switch for big exchanges to start acquisitions.
  • Increasing regulatory scrutiny in Asia also set to contribute to the increase of M&A deals.

According to Binance’s CEO Changpeng Zhao, a consolidation among crypto exchanges will increase the number of merger and acquisition deals in the Asian market. Reportedly, this move will help defragment the Asian crypto market, which is currently drawing strict scrutiny from regulators.

This news comes after a PwC report unveiled that the number of M&A deals in the nascent sector had taken a deep dive. Per the publication, M&As in the crypto space plummeted 76 percent in the past year. The number of all deals in the sector also plunged 40 percent to 114. The US accounted for 50 percent of this figure, while Asia’s share climbed from 14 percent to 22 percent.

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Setting the pace for the boom of M&A deals in the industry this year is Binance. The firm, which operates the biggest crypto exchange bought Coinmarketcap, a data provider on March 31. This purchase added to Binance’s nine purchases within the crypto industry in the past year.

Commenting on this deal, Changpeng Zhao, Binance’s CEO said,

“In Asia, we are interested in exchanges that have existing banking relationships, which enable them to accept trading in local fiat currencies,”

Volatility in the crypto market set to drive M&A deals

March was a significant month in the price history of bitcoin (BTC). This is because the coin’s price plunged to £2,878 within 48 hours, denoting a sharp 30 percent drop. However, the coin managed to recover and it trading at £5,362 at the time of writing, 9:12 AM UTC.

Massive price swings increase the interest of crypto traders. This is because they stand a chance to earn big profits by buying crypto at low prices and selling their assets once there is a significant price increase. Due to BTC’s volatility in March, the coin set a record of a daily turnover of £60,673,321,500 on March 13. As a result, cash-rich crypto exchanges developed an appetite for buying smaller exchanges.

While volatility in the crypto space played a significant role in attracting crypto exchanges to make acquisitions, there are other driving factors. For instance, increasing oversight from financial watchdogs makes it hard for small exchanges to operate. Per Zhao, small crypto exchange will begin struggling with the costs of keeping up with the demands of regulators. Consequently, they will be forced to merge with larger exchanges to stay afloat.

Recent acquisition deals in the crypto space

Apart from Binance’s recent purchase of Coinmarketcap, the exchange also bought WazirX, an Indian crypto exchange in November last year. This deal involved £6.4 million. Another similar deal was Gojek’s purchase of Philippine-based Coins.ph for £57.6 million in January this year.

Do you think there will be more M&A deals in the crypto space this year than there was in 2019? Share your thoughts in the comment section below.