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The 200 exchange venture investments completed since 2012 have disclosed a total amount of US$1.5 billion, of which North America accounts for 47%.
Original title: “Combining the Exchange’s Ten-Year Financing: Asia has the largest number, and DCC investment takes the lead”
Written by: John Dantoni
- The Block Research analyzed 123 cryptocurrency spot and derivative exchanges. Some of these exchanges are regional and some are international exchanges.
- Since 2012, a total of 200 exchange risk investments have been completed, with a total disclosed amount of US$1.5 billion, of which the 15 financings with the highest financing amount totaled US$1.1 billion.
- Digital Currency Group is the most active investment institution in the field of cryptocurrency trading, with a total of 19 investments.
Looking back over the past decade, the growing popularity of digital assets has given birth to a simple business model-providing a platform that allows users to easily buy, sell or trade these assets.
Block Research analyzed 123 spot and derivative cryptocurrency exchanges, which either meet the needs of specific regions or operate internationally. In this research release, we divided the exchanges into the following regions: Africa, Asia, Europe, the Middle East, North America, Oceania, and South America.
From a regional perspective, Asia, Europe and North America have the largest number of cryptocurrency exchanges, accounting for about 69% of cryptocurrency exchanges in total. Asia is the region with the largest number, accounting for 35% of the total. The main demand comes from China, India, Japan, Singapore and South Korea.
Since 2012, there have been 200 exchange risk investment events, involving a total of US$1.5 billion in venture capital funds. Although North America lags behind Asia and Europe in the number of exchanges, the region receives the most funds, accounting for 47% of all venture capital. The total number of investments in North America is largely due to the fact that there are only three cryptocurrency exchanges. Coinbase, Kraken and Paxos (itBit) have raised a total of $647.9 million, accounting for 91% of the total funds in the region.
Asia has always been the second most attractive region, and exchanges in this region attracted a total of approximately US$456.2 million in investment, accounting for approximately 30% of all investment. Unlike North American exchanges, funds in this region are not concentrated in a few companies. However, in April 2019, Bithumb’s $200 million Series A investment accounted for approximately 43% of all investments. Binance, Bitfinex, bitFlyer, Bithumb, BTCC, CoinFLEX, FTX, Liquid, OkCoin, Zaif and Zebpay have all achieved transactions of more than USD 5 million.
67 early transactions involving cryptocurrency transactions have been completed. Back in 2012, the average investment amount of start-ups was approximately US$5.4 million, and the median investment amount was approximately US$3 million.
In the early days, a large number of new exchanges flooded the market, but for each successive year, the investment in the early exchanges decreased. By 2018, only 2.4% of the financing was early transactions. On the contrary, investors tend to invest in exchanges that have formed a strong influence in the market and are raising funds for later trading. Other investors choose to focus on other areas in need, shifting from retail exchanges to products and services that institutional investors pay attention to.
Seed round financing
Among these 35 seed rounds, the average financing scale was approximately US$2.9 million, and the median financing amount was US$1 million. Of the 35 seed financings, 24 (approximately 69%) occurred in 2016 or earlier.
Since then, the vast majority (67%) of seed rounds have involved cryptocurrency exchanges that cater to developing regions.
Investors have turned to exchanges such as AirTM, Buda and Volabit to focus on the growth of cryptocurrencies in South America. VALR and Yellow Card launched a seed round of financing to launch a cryptocurrency exchange covering the entire Africa. Both BitOasis and Rain have attracted investments in the Middle East through seed trading. India is also a popular area of focus, with Unocoin and CoinDCX both raising seed rounds of investment.
The cryptocurrency exchange has completed 24 post-financing. The average transaction size of late-stage venture capital is approximately US$60.2 million, and the median transaction size is US$27 million. Approximately 75% of financing occurred in 2017. As the industry began to mature, these transactions became popular. Oceania is the only region where there is only one exchange for post-financing. In North America, Coinbase, Kraken and Paxos have all carried out late-stage financing. In Asia, BitFlyer, Bithumb, Liquid, OKCoin, Unocoin and Upbit have all carried out post-financing. In Europe, Bitpanda and eToro both carried out post-financing. Similar deals were also reached in Africa with Aza (formerly BitPesa), Emirex in the Middle East, and Bitso and Ripio in South America.
Mergers and acquisitions
As competition among companies began to move towards integration, mergers and acquisitions in cryptocurrency exchanges became popular in 2017.
In 15 transactions involving the purchase of cryptocurrency exchanges, a total of approximately US$1.1 billion was spent. Combined with venture capital, M&A activities accounted for 32.7%, 62.1% and 39.2% of financing in 2017, 2018 and 2019, respectively.
So far this year, reports of mergers and acquisitions have not yet occurred, but we expect the trend of industry consolidation to continue. Deals in more developing regions continue to mature and, over time, will become more profitable for large companies, just like the recent acquisition of Luno by Digital Currency Group, which opened the door to development in Africa.
So far, two exchanges in the blockchain industry have been acquired, with a reported purchase price of US$400 million. The two transactions are NXMH’s acquisition of Bitstamp and Circle’s acquisition of Poloniex. After that, the investment group led by Justin Sun, the founder of TRON, acquired Poloniex again for USD 150 million.
Asian acquisitions include Nexon’s acquisition of South Korean exchange Korbit for US$90 million, Fisco’s US$44.2 million acquisition of Japanese company Zaif, Monex Group’s US$33.6 million acquisition of Coincheck, and Binance’s acquisition of Indian exchange WazirX.
Digital Currency Group is the most active investor in the field of cryptocurrency trading, with a total of 19 investments. The company’s investment portfolio includes operations in all seven regions, with Asia, North America and South America receiving the most attention.
The company’s business in Asia includes bitFlyer, BTCC, CoinFlex, Korbit and Unocoin. It has invested in Coinbase, Paxos (itBit), Kraken and ShapeShift, the non-custodial exchange of the North American Exchange. In order to understand the potential growth potential of South America, the company invested in Bitso, Buda, Ripio and Volabit.
Pantera Capital and Boost VC are the second largest active investors, each with 7 investments. Pantera’s investment covers all regions except Oceania, and Boost VC has not yet invested in exchanges in Africa, Europe or the Middle East.
Sequoia Capital Sequoia Capital has invested in four cryptocurrency exchanges. Of the four investments, three are located in Asia, including Binance, CoinSwitch and Huobi. The company is one of the investors in Robinhood, which provides cryptocurrency purchase and trading services.
NXTP Ventures is an early stage venture capital fund that invests mainly in companies in Latin America. The fund has made four investments in exchanges in South America, including AirTM, Buda, Ripio and SatoshiTango.
Although Coinbase Ventures did not make the list of the most active investors, the exchange made three investments, including CoinDCX in India, and AirTM and Bitso in South America. Before Luno, an exchange focusing on the African market, was acquired by Digital Currency Group, PayU and its parent company Naspers had invested in it.