(Bloomberg) -- With Donald Trump headed back to the White House after an election in which candidates backed by the crypto industry overwhelmingly won seats in Congress, the stage appears set for a rush of digital-asset mergers.
A half-dozen mergers advisers and venture capitalists interviewed by Bloomberg News after Trump’s emphatic victory said they expect a sharp pickup in activity next year. They cited expectations that Trump will follow through on his pledge to remove US Securities and Exchange Commission Chair Gary Gensler, who’s led a years-long crackdown on the industry, as well as for more favorable legislation.
A post-election spike in cryptocurrency prices provided a first indication that the record $135 million the industry funneled into this year’s US political races up and down the ballot might pay off. Now, many CEOs emboldened by that reaction are likely to rely on takeovers to speed up expansion plans, according to investment bankers focused on digital assets.
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“With Trump in the White House, we expect 2025 to be a much stronger year for dealmaking,” said Casper Johansen, who runs The Spartan Group’s digital-assets advisory business.
Crypto executives have long blamed a dearth of mergers and acquisitions — even as asset prices staged a two-year revival — on uncertainty around US regulations. Other financial centers, from Singapore to Dubai, have already established crypto regulatory regimes, and the European Union’s Markets in Cryptoassets framework will take full effect at the end of 2024.
That left the US as the last major market without a comprehensive set of regulations for crypto — fanning a perception of what the industry has come to deride as “regulation through enforcement.”
Trump’s victory will ease lingering C-suite fears of deals being blocked, business lines being declared illegal and legal action from the SEC, according to Dragonfly Capital Managing Partner Haseeb Qureshi. “All things considered, I expect the next four years to be much more favorable than the last four,” he said.
It’s far from certain that eased regulations will unleash an M&A bonanza. One possible hurdle to a pickup in deals is that most crypto firms remain closely held, meaning that if they pay in stock, negotiations about valuations can become fraught. Many would-be acquirers last raised money during the bull market that ended in 2022, at valuations far higher than those prevailing today.
The resulting mismatch between buyers’ and sellers’ expectations “is where we’ve seen a lot of these potential deals die during negotiations,” said Rob Hadick, a general partner at Dragonfly.
But buyers from outside crypto are also circling, and some of them wield vastly greater resources.
Stripe Inc., the fintech firm valued at $70 billion in a July funding round, last month said it plans to buy stablecoin startup Bridge. Stripe will pay $1.1 billion, a person familiar with the matter said at the time. That would rank among the biggest-ever acquisitions of a digital-asset company.
The deal is also notable for the windfall it netted Bridge backers including Sequoia Capital. The Menlo Park, California-based VC firm’s stake is now valued at more than $100 million, up fivefold from what Sequoia paid when it invested in Bridge just months earlier, Bloomberg News reported Oct 28.
“The hope is that this is the trigger moment for other tech firms to also go on the offensive,” said Chris Ahn, a partner at Haun Ventures, which also participated in Bridge’s Series A round and holds a roughly 4% stake. He didn’t comment on the current value of the holding.
Trump, a onetime crypto skeptic won over after a massive lobbying effort, campaigned on promises to stockpile the original token for a national reserve and make sure all remaining Bitcoin is “made in the USA.” His message resonated with a small but financially influential cohort left embittered by what they describe as unfair treatment following the FTX implosion two years ago.
Among crypto companies that have already signaled an appetite for acquisitions are brokerage FalconX and stablecoin operator Tether Holdings Ltd. Tether, which generated an unaudited profit of $2.5 billion in the third quarter off its massive reserves, said in June that it expected to pour more than $1 billion into deals in the next 12 months.
“The heat in the space has increased dramatically in the last 24 hours,” Steve McLaughlin, chief executive officer of crypto-focused investment bank FT Partners, said on Thursday.
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