The blockchain industry shrugged off the craziness of the 2020 pandemic, with many companies thriving in the “remote” working environments brought about by COVID-19.
Almost $700 million in mergers and acquisitions took place in 2020 across 83 transactions. That’s the largest number ever and a sizeable increase from the previous record of 69 M&A transactions in 2018. The majority of activity last year was within the industry itself, consolidating the sector with minimal engagement from external companies.
More than 90% of the $691 million reported was comprised of the top three acquisitions by Binance ($400 million), FTX ($150 million) and Coinbase ($90 million).
Binance’s purchase of CoinMarketCap at the end of March 2020 for a reported $400 million equaled the largest blockchain acquisitions of all time, rivaled only by Circle’s purchase of Poloniex and NXMH’s purchase of Bitstamp, both for $400 million, in 2018.
The leading exchange by volume received sharp criticism over the purchase, as it appears to represent a conflict of interest given that CoinMarketCap is a data and analytics company that provides comparative data about crypto exchanges, including Binance.
Jack Purdy, an analyst for Messari, told Cointelegraph that the takeover sets a negative precedent for the industry, no matter how well either company behaves. “It does represent a fundamental conflict of interest that has negative externalities for the space,” he said. “It’s like if Joe’s Pizza came out with the top 10 pizza slices in New York and everyone that uses that list happens to be those least informed to make the decision on where to go.”
“Even though Binance/CMC can be completely well-intentioned, it’s impossible for ratings not to be influenced by the underlying bias of the creators. If there are objective weightings to a system that would hurt Binance’s standing, it’s more likely than not that it won’t be implemented.”
Binance has claimed that both companies are individual entities and there is no bias from CMC. Despite the early criticism, it appears that sentiment toward the acquisition has softened in more recent months. In October 2020, FTX CEO Sam Bankman-Fried voiced his opinion on Twitter that Binance was actually a lifesaver for CoinMarketCap:
“Pretty much the day Binance bought CMC, it started getting better — a lot better. It has a lot of catching up to do, but the product has gone from hopelessly f—ed to competitive.”
This wasn’t the only activity by the leading exchange, with Binance acquiring multiple other companies throughout 2019 and 2020, including crypto debit card provider Swipe for an undisclosed sum. Similar to CoinMarketCap, Swipe chief operating officer John Khenneth also stated that “The deal was structured where Swipe is able to run the company independently from Binance.”
Other Binance acquisitions include Korea-based stablecoin company BxB, decentralized app information platform DappReview and Indian crypto exchange WazirX.
In a recent press conference, Binance founder and CEO Changpeng Zhou hinted that the company will acquire between 20 to 30 other companies in 2021, further strengthening its position in the crypto sector.
Crypto exchange FTX, which only launched in 2019, was the only other company to conduct a nine-figure acquisition in 2020, with the purchase of portfolio management app Blockfolio for $150 million.
The purchase has the potential to bring its 6 million users to the exchange. Although Blockfolio does not have as many unique users as CoinMarketCap, the level of user engagement is considerably higher, with more than 150 million impressions per month.
Blockfolio co-founder and CEO Ed Moncada told Cointelegraph that the company will continue to function as an independent app.
United States crypto exchange Coinbase actually leads the pack with the largest number of acquisitions to date — six more than Binance. The company has completed at least 16 deals in its history, with the most recent one being the acquisition of prime brokerage platform Tagomi for $90 million.
According to reports, Tagomi had been struggling with revenue as low as $1 million from its $1 billion in annual trading volume after it slashed trading fees.
Publicly traded companies also got involved, with advanced software solutions company CleanSpark acquiring crypto mining firm ATL Data Centers for just under $20 million worth of the company’s stock.
Other notable acquisitions include Galaxy Digital’s purchase of digital-asset investment and borrowing platform DrawBridge Lending, as well as futures markets liquidity provider Blue Fire Capital. Although the figures were not disclosed, Galaxy Digital said that DrawBridge will end up with more than $150 million in third-party assets as a result.
In September 2020, New York-based CB Insights announced it would soon open an office in Amsterdam as part of its acquisition of blockchain data provider Blockdata for an undisclosed sum.
Smart contract provider TrustSwap also expanded its reach, acquiring one of its biggest competitors, Team.Finance.
The recent acquisition of second-layer Ethereum scaling solution OMG Network by Hong Kong-based over-the-counter trading firm Genesis Block is said to help accelerate the network’s development, with a specific focus on DeFi.
PayPal was also looking to join the mergers-and-acquisitions party after enabling crypto purchases for the first time; however, talks to acquire crypto custody provider BitGo appear to have now fallen through. Rumors suggest PayPal is in talks with other crypto companies.
With the dramatic surge in decentralized finance this year, burgeoning DeFi protocols have also started merging. In November, Yearn.finance went on a collaboration and merger spree, including with market coverage provider Cover Protocol and lending protocol Cream Finance.
Although acquisitions are often a sign of a thriving industry, they have led to some critics raising concerns over increasing centralization. Acquisitions of rivals by leading companies strengthen their control of the market, potentially reducing competition.
DeFi surge, rising TVL and new partnerships underpin Ren’s 100% rally
Interoperability between blockchains is rapidly becoming one of the buzz phrases being thrown around when discussing decentralized finance and the coins most likely to rally during an altcoin bull run.
The rapid growth of DeFi, its ever expanding total value locked and soaring ETH gas fees further highlight the sector’s need for a layer 2 option that also supports the ability to transact value across different networks.
REN’s open protocol is designed specifically to fill this need by providing interoperability and liquidity between the top blockchains including Bitcoin, Ethereum and Zcash.
Over the past three weeks the price of REN has increased by more than 200%, going from $0.251 on Dec. 27 to a new all-time high of $0.778 on Jan. 20 driven by a record $369 million in 24-hour volume.
Three reasons for the recent price surge in the price of REN include the announcement of a collaboration with Google, the continued increase in total value locked on the platform and the ability to earn passive income in multiple cryptocurrencies through the operation of a darknode.
Google software pivot boosts sentiment, addresses RENvm scaling issues
On Jan.19 the REN team tweeted:
Ren has been researching & building on @Asylodev, an open and flexible framework by @Google. @GCPCloud confidential computing relaxes RenVM’s economic constraints, allowing for an unbounded scaling solution. #RenVM.”
Not long after the tweet, REN price began to rally to a new all-time high. As mentioned in the tweet, Asylo is an open and flexible framework from Google designed to help build portable applications that run on Secure Enclave hardware.
The secure enclave hardware allows users to run general-purpose applications in a secure environment where both the data, and the application itself, cannot be compromised by anyone, including the user. This makes for a more secure experience for all parties involved and helps protect against malicious code and backdoor attacks.
Asylo also makes it possible to port an application from one type of hardware to the next, meaning that developers can support multiple implementations with relative ease, including Intel implementations, AMD implementations, and any others that appear in the future. The diversity of choice this allows is an important feature to ensure decentralization on the network.
Total value locked soars to a new high
Community engagement and added value are key factors when it comes to the long-term success of a blockchain project.
Since the release of the Ren virtual machine mainnet (RenVM) in May 2020, engagement on the platform has steadily increased as Bitcoin holders now had another way to bring their BTC to Ethereum and the growing DeFi space.
As seen in the chart below, the total value locked on the Ren platform reached a new all-time high of $653.6 million on Jan. 20 and a total of 14,670 BTC are locked on the platform to create renBTC.
The list of assets that RenVM supports continues to grow with BTC, Bitcoin Cash (BCH), Zcash (ZEC), Filecoin (FIL), Terra (LUNA), Dogecoin (DOGE) and Digibyte (DGB) currently available to transact on the Ethereum and Binance blockchains.
Development is currently underway to make it possible to interact on the Polkadot (DOT), Solana (SOL) and Cosmos (ATOM) networks as well, which would further enhance the interoperability provided.
Darknodes, passive income and a decreasing supply
The third driving force behind the recent price appreciation of REN relates to the Ren token use case and how it can help users earn passive income. RenVM is a network of virtual computers that make up a virtual machine, which are also referred to as Darknodes.
REN token holders who wish to operate a darknode need to lock up 100,000 REN which wiil enable them to process transactions on the network and earn a fee in the form of the token transacted. Thus, a darknode operator has the opportunity to earn passive income in the form of multiple different cryptocurrencies from one location.
As can be seen in the above graphic, 17.13% of REN’s total supply is currently bonded on the platform and supports the operation of darknodes.
During the most recently completed cycle, the network as a whole earned $839,128 in fees in the form of BTC, ZEC, FIL and BCH. The total network fees collected since the launch of the RenVM equals $2.975 million.
The continued addition of new tokens and interoperability with new blockchains will likely see increased usage of the network and an increase in the amount of fees earned. At the current price of $0.6157 it costs $61,570 to operate a darknode.
As activity on the network increases, the amount of fees generated will also increase, making it even more lucrative for token holders to operate a darknode. This has the potential to lead to further price appreciation from REN as every new darknode results in a direct decrease in its circulating supply.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The virtuous cycle of social engagement with crypto
One of the tropes that observers commonly invoke to explain the forces behind the crypto markets’ surge at the end of 2020 and in early 2021 is that the process has been mainly driven by the inrush of institutional investment.
While there are many good reasons to believe that the race among the big players of traditional finance to get into digital assets has indeed provided much fodder for the blast, the overwhelming focus on this narrative can make it seem that retail investors had a little role to play.
Shifting the spotlight away from the public can be misguided because blockchain is fundamentally a social technology. Bitcoin (BTC) as an investment vehicle would struggle to exist without the bustling Main Street marketplace and a social media arena where market-driving narratives emerge and clash.
Surging prices = Surging interest
Perhaps the easiest trend to capture is the surge in search activity coinciding with rapid gains in crypto prices. One established metric is the volume of Google searches of cryptocurrency-related terms. In the week of Jan. 3, Google Trends’ global interest over time index for the term “Bitcoin” reached the value of 68, which amounts to more than two-thirds of the all-time high registered in the week of Dec. 17, at the height of the previous record-breaking bull run in 2017–2018.
Frantically, searching for the meaning of basic crypto terms amid the hype waves rocking the internet in the wake of a major price rally could be indicative of a potential newcomer’s first impulse to educate oneself on the subject. While this is a necessary first step for eventually becoming involved with digital assets in a more tangible way, search data alone only reveals a fraction of how deep engagement truly is. Spikes in searches could as well be a marker of a FOMO-driven behavior that does not translate into more meaningful activity once the hype dies down.
The volume of traffic going to specialized cryptocurrency analytics websites could be a somewhat more precise marker of the arrival of a new wave of the crypto-curious who are willing to do their reading beyond headlines. CoinGecko, one of the major crypto data aggregators, shared some of its internal analytics to provide a sense of how much more engagement they have received against the backdrop of the recent market surge. The firm’s co-founder and chief operating officer, Bobby Ong, commented to Cointelegraph:
“We saw a 77% increase to our Bitcoin page in the past 30 days [between Dec. 13 and Jan. 13] when compared to the previous period. Views to our Ethereum page increased by 90% during this period, too. Overall, our traffic increased 43% during this period.”
Still, there is no way to tell what share of these gains has been driven by newcomers versus returning crypto investors.
If we accept that participating in a Twitter discussion about cryptocurrency is more likely to reveal a meaningful engagement with the digital asset space than simply looking up what Bitcoin is, there is some good news in fresh data.
While the indicators of generic interest as gauged by Google Trends in the wake of the recent rally failed to surpass the highs of late-2017, several metrics related to Twitter conversations have hit all-time highs. Treyce Dahlem, a research analyst at The Tie — a digital assets data provider — explained to Cointelegraph:
“While institutions may have started this crypto rally, retail has definitely arrived. The average number of daily Twitter users talking about Bitcoin has hit a new all-time high of 35,883, breaking the previous high of 35,181, set back in January of 2018. This is huge, as this shows that retail investors are here and excited about Bitcoin.”
Dahlem added that the share of tweets about Bitcoin coming from unique Twitter accounts has also reached a record high at 53.3%, suggesting that the increased volume of conversation is fueled by new users jumping in and not just the intensified discussions among the existing participants of Crypto Twitter.
An even more challenging task is to gauge the state of crypto awareness and adoption that predated the latest price spike. This type of insight could lend credence to the argument that increased retail investors’ engagement could not only stem from the crypto markets’ surge but at least partly fuel it.
The type of data best suited for answering broad, population-level questions around the share of people who know about digital assets and use them can be obtained through surveys. While there are plenty of crypto-related surveys, few of them even aspire to reach any level of representativeness, much less systematically apply the same methodology across several time points to reliably track the dynamics.
One exception is perhaps the Crypto Survey fielded by venture company Blockchain Capital every 18 months, starting in the fall of 2017. It uses a sample of U.S. adults that is weighted such that all key demographic characteristics are represented in a proportion similar to the general population. The latest round of data, collected in October 2020, speaks to the Americans’ rapid progression through what the authors of the report labeled the “adoption funnel.”
According to the survey results, less than two months before crypto markets rallied in December, 90% of U.S. residents reported having heard of Bitcoin; 45% were at least somewhat familiar with it; 45% agreed that it is a positive innovation; 41% were convinced that most people will be using Bitcoin in the next 10 years; and 34% said that they were likely to purchase Bitcoin in the next five years. For each of these metrics, sizable increases from respective spring 2019 values were apparent.
Related: Access denied: Banks seem prone to cryptophobia despite growing adoption
These trends are not exclusive to the United States or even to the elite club of the world’s most developed economies. Occasional reports from a wide array of nations, from Australia to Nigeria, highlighted that in 2020, people around the globe have been getting familiar with digital assets and joining the ranks of crypto users at rates that could only be explained by fundamental factors.
Granted, newsworthy bull runs and accompanying spikes in online attention help accelerate engagement and subsequent adoption of crypto, but it’s this virtuous cycle that is the expanding adoption that, in turn, allows markets to thrive.
Alleged ‘ghost’ Bitcoin mining firm traded on Nasdaq faces class action lawsuit
Bit Digital (BTBT), a Bitcoin mining company traded on the NASDAQ stock exchange, is the subject of a class-action lawsuit that alleges the company fabricated the extent of its Bitcoin (BTC) mining operations.
According to the lawsuit which was filed in the Southern District New York court on Jan. 20 by plaintiff Anthony Pauwels, Bit Digital misled investors and made materially false claims about the extent of their Bitcoin mining business, causing significant financial harm for investors.
Specifically, the plaintiffs reference an investigative report by J Capital Research which claims Bit Digital simply lied about having Bitcoin mining farms in operation across China. The firm’s website claims to have over 40,000 mining rigs currently in operation, exerting a hash rate of 2,253 PH/s, having successfully mined over 1,500 BTC since the beginning of 2020.
However, researchers at J Capital say they contacted government officials in the Chinese provinces in which Bit Digital claimed to operate, only to find that no one had ever heard of them.
When J Capital’s research hit the news headlines, Bit Digital’s stock price plummeted 25%. From BTBT’s peak valuation of $29.27 in early January, the stock price has since fallen 44%, to the current valuation of around $16.
Bit Digital issued a response to the claims made by J Capital on Jan. 19, pointing out that the company had filed all of its documentation with the Securities and Exchange Commission, and had always sought to update investors and regulators with accurate data.
However, the plaintiffs in the lawsuit against Bit Digital say the firm’s executive ownership — CEO Min Hu and chief financial officer Erke Huang — were in a position to dictate the contents of any and all documents relating to the running of the business:
“Because of their positions with the Company, [Hu and Huang] possessed the power and authority to control the contents of the Company’s reports to the SEC, press releases and presentations to securities analysts, money and portfolio managers and institutional investors, i.e., the market.”
Pauwels seeks reparations for the 1,000 units of BTBT shares he purchased at a price of $21.81 per share on Dec. 12, 2020, as well as any other compensatory damages, court fees and expenses.
The plaintiff demanded a trial by jury. No legal response has been made by Bit Digital at this time, nor did the company respond to Cointelegraph’s request for comment.
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