As Bitcoin and Other Cryptos Fall, Digital-Asset Firms Pump Brakes on Deals

Plunging cryptocurrency prices are starting to throw a wrench into the plans of firms that deal in bitcoin and related areas, amplifying the impact of an already brutal market retreat. 

Heading into 2022, crypto deal making was hot as companies sought to stake positions in an evolving industry. So far this year, there have been 42 announced acquisitions of crypto-related companies, a pace that would exceed last year’s 60 deals, according to Dealogic. 

But it has been nearly two months since the last deal was announced, a period that coincides with a tumble for digital assets and suggests some companies may find it hard to reach or complete mergers until markets clear. Among the firms potentially caught in an uncomfortable limbo:

Mike Novogratz’s

crypto merchant bank, Galaxy Digital Holdings Ltd., which agreed in the spring of 2021 to buy crypto-custody specialist BitGo in a deal that hasn’t closed.

Some promoters have billed bitcoin and related assets as being resistant to inflation and generally uncorrelated with other risky markets, such as for stocks and some bonds. But the breadth of the 2022 market rout has skewered those claims, and added to the fallout from the Federal Reserve’s campaign to curtail inflation by raising short-term interest rates. Bitcoin is down by two-thirds from its high over the past year, compared with a 22% drop in the S&P 500 and a decline of 86% at crypto exchange

Coinbase Global Inc.

WSJ’s Dion Rabouin explains why Wall Street is now betting big on crypto and what that means for the new asset class and its future. Photo composite: Elizabeth Smelov

For now, some investors in crypto-related sectors remain sanguine, contending that the market is inherently volatile and that the companies that offer the most value over the long haul could outlive the current shakeout. Some say they are preparing for what they expect to be a vigorous period of value-seeking investment once the meltdown pauses.

“I expect the amount of M&A will increase as companies with strong balance sheets look to acquire crypto firms that have valuable assets or intellectual properties and weaker balance sheets,” says

Kevin Kang,

who helps run BKCoin Capital LP, a New York crypto hedge fund.


Can crypto companies survive the current downturn? Why or why not? Join the conversation below.

Six previously announced deals are waiting to close, Dealogic says, and some investors question if they all will reach the finish line. In May 2021, for example, Mr. Novogratz’s Galaxy Digital agreed to buy crypto-custody specialist BitGo for $265 million in cash along with Galaxy shares.

If completed, the deal promises to make Galaxy a major player in the competition to attract institutional and individual investors. But Galaxy has already delayed the close and has increased the shares promised to BitGo holders.

The transaction is contingent on Galaxy listing its shares on the Nasdaq exchange. But Galaxy continues to hold discussions with the Securities and Exchange Commission about approval for its plan to reorganize as a Delaware-based company and then list on the Nasdaq, according to people close to the matter.

For its part, Galaxy has expressed confidence the transaction would be completed.

“We’re going to hope for the best and we’re going to continue to engage with the SEC,” Mr. Novogratz said in a conference call with shareholders in late March.

Galaxy and BitGo declined to comment. 

But some investors say turmoil in the crypto world may make it more difficult for the deal and others.

“They have delayed it a couple of times now and the terms of the deal say it needs to close by the end of 2022,” says

Eric Jackson,

founder of EMJ Capital Ltd., a Toronto hedge fund.

Mr. Jackson is a fan of BitGo and says Galaxy shares are attractive, especially if the acquisition goes through. But he notes that Galaxy’s shares, which are down about 67% over the past year, are valued at about $2 billion, not much more than BitGo’s $1.2 billion value in the deal.

“You would think that, if BitGo is still worth anywhere near $1.2 billion and people assumed the deal would close, Galaxy would get credit from investors in its market cap,” he says.

The deal comes as crypto-related firms like Galaxy try to establish themselves as entrenched players capable of making money no matter what happens to crypto prices, much as Wall Street firms profit in all kinds of markets. Galaxy sells crypto-investment funds, handles trades for other big investors and advises digital-asset companies on acquisitions.

“Crypto firms are doing ‘down rounds’ and cutting their workforces, this will lead to interesting M&A opportunities and industry consolidation,” said Mr. Kang of BKCoin Capital.

Write to Gregory Zuckerman at

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