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State of the Crypto Markets: We enter 2025 with optimism
The U.S. elections and the associated expected shift in the U.S. regulatory stance have changed everything.
Crypto asset values, public equity prices, public financings and the less visible M&A and private financing markets have all demonstrated this change in sentiment. Even more importantly, corporate executives and venture capital and growth investors who started 2024 with caution now end the year with optimism. This optimism is reflecting itself in our frequent conversations and transaction-related engagement with ecosystem players, both crypto-native and traditional finance. Plenty of challenges remain but we also feel optimistic that 2025 may be looked upon in retrospect as a breakout year.
This Year-End Crypto M&A and Financing Report provides detailed data and observations.
2024 CRYPTO YEAR IN REVIEW HIGHLIGHTS
Mergers & Acquisition Activity Up Strongly
M&A activity is back, reaching a record level of transaction announcements in Q4 2024, rounding out the year on a strong upswing. Overall 2024 increased by 29% in transaction count from last year and we are now within spitting distance of record 2022 levels. Regardless of increased activity levels, the vast majority of transactions are “tactical” and rather small. Anecdotal evidence suggests this will change in 2025 with the reemergence of strategic, high-value M&A.
Private Financing Activity Recovering As Well
Similarly, private financing activity was up 31% in 2024 with the strength coming from seed and early stage venture. Growth stage activity continues to be challenged actually decreasing by 6.3% this year, however, this too is likely to change. The catalyst will be strengthening financial performance by relatively mature crypto businesses, the necessary prerequisite to attracting growth capital.
Public Markets Demonstrated Exceptional Price Appreciation and Financing Activity
The Architect Partners Crypto Index rose 59% in 2024, significantly outperforming other equity indices and assets such as gold. Many in the index significantly outperformed the index overall. The public financing spigot, particular debt, was wide open with $18.5B raised in public markets, by several Bitcoin network operators, Coinbase, and the unique anomaly called Microstrategy.
2025 THEMES ARCHITECT PARTNERS IS TRACKING
Crypto Has Delivered Exceptional Value Creation
Crypto has attracted $130B of risk capital which today represents $3.8T in value, 29x returns, far better than traditional venture investing. This far outpaces the Internet at the same point in market development. More coming soon when we publish an update to our Family Ties report.
Initial Public Offerings are Coming
Numerous companies are on that track but 2026 may be stronger than 2025
Leverage Is Quickly Returning
Friend or foe this time?
Mergers & Acquisitions – It’s Time for Urgency
Traditional financial services companies are entering the crypto space, a potentially existential competitive threat to some crypto-native players. Both will be spurred into action.
Moving Beyond Speculation – An Important Next Step
Stablecoins are proving to be a real-world use case, with both businesses and consumers participating. What other use cases have viability and can scale? The answer remains opaque.
Eric F Risley
Founder & Managing Partner
January 8, 2025