Recent crypto troubles (the collapse in FTX, in November, the run on crypto-friendly bank in March, etc.). The viability of crypto as a whole has been questioned. A closer look at the performance of crypto miners and blockchain companies over time can help to reduce these doubts. Financial investors are still active, and M&A is still a strong activity.

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This article will concentrate on two engines in the crypto-world:

  1. Bakkt Block Coinbase PayPal
  2. Crypto miners Canaan Digital, Riot, Hive and Marathon Digital

Both sectors have done poorly over the last 12 months compared to the Nasdaq Composite Index, which has also performed badly. The chart below shows their respective market cap drops (with each starting at 100 in April 2022).

This observation, however, must be put in perspective.

Investors are now attributing a similar multiple of revenue to these two crypto-related industries and the Nasdaq, despite their pain. We track this using enterprise value (EV) divided by revenue. This metric has experienced a huge rebound since the start of the year. It coincides with the large rise in bitcoin (BTC).

Second, when we consider a longer time frame (as shown below), the Nasdaq still performs better than the mining group between April 2020 and 2023, with a 90% to 63% advantage. The blockchain group has fallen 12%. Crypto miners benefited from a massive bubble in the first half 2021 (traded at 30x to 70 EV/revenue). These extreme valuations began to normalize in early 2022 and then converged at 3.5x EV/revenue by mid-2022. The Blockchain group tracks the Nasdaq pretty closely, but with less volatility.

VC Investments and M&A Activity

In the crypto-space, there are still many investors who are very active. In 2022 there will be 2,541 venture capital investments (VC) totaling $26.2 billion for crypto or blockchain businesses. Celestia raised $53 in a series B round. Matter Labs raised 200 million in a series B. Fenix Games raised $150 in early-stage rounds.

By the fourth quarter 2022, the 10 most successful VC-backed firms had raised an estimated $8.45 billion over their lifetime. Coinbase was the top financial investor in crypto for the first quarter of 2023, with 340 investments. This included Amber, CoinDCX, and CoinTracker. NGC Ventures ranked second with 258 (Parami Controls, Resource Finances, etc.). Six of the top 10 financial investors reside in the U.S., three are from China and one is based in Singapore.

Despite the shockwaves caused by the FTX bankruptcy in November, there is still a lot of activity within the ecosystem. In the fourth quarter, notable M&A transactions included Gleec BTC Exchange buying Blocktane at $1.5 billion; Binance purchasing TokyoCrypto at $225 million; and Bankless acquiring Earnifi at $150 million.

The conclusion of the article is:

The digital asset industry has matured as the valuations of crypto-related businesses have converged. Recent crisis has pruned non-viable participants and investors have adopted a less speculation stance towards this asset class. Crypto mining is a good example of how certain crypto subsectors can outperform their peers. Blockchain security platforms, such as Fireblocks Taurus and Copper, are of particular interest because they offer solutions for protecting digital assets like cryptocurrency. Private investors will support valuations, as well as M&A activities driven by consolidation at an international level.

Nick Baker is the editor.