Big investors are pushing up the valuation of crypto companies – Finance Bitcoin News

Venture capital firms and large investors are pushing up the prices of crypto startups. Boutique investment companies and family offices are being crowded out by large venture capital firms, private equity funds and even some pension funds.

Venture capital firms push up prices for crypto startups

Henri Arslanian, head of cryptocurrency at professional accounting and financial services company PricewaterhouseCoopers (also known as PricewaterhouseCoopers), said that the valuation of cryptocurrency companies is high due to large investors entering the field.

In an interview with Bloomberg on Thursday, the executive explained that boutique investment companies and family offices are being crowded out by large venture capitalists, private equity funds and even some pension funds. He pointed out that smaller venture capital firms are dissatisfied with this trend. Aslanian description:

Suppose they are considering a deal that they think is worth $10 million, and you will see large venture capital firms come in and offer higher valuations. This situation often occurs in very early companies, such as 5 to 20 million US dollars-prices are inflating.

According to the 2021 Cryptocurrency M&A Status Report, although transaction activity in 2020 only increased by 10% over the previous year, the total transaction value doubled to US$1.7 billion. This is mainly due to some large acquisitions in the field of crypto trading, including Binance’s $400 million acquisition of Coinmarketcap and FTX-Blockfolio’s $125 million transaction. This trend continued this year, when Galaxy Digital acquired Bitgo for $1.2 billion.

In July, the valuation of derivatives exchange FTX rose to $18 billion after the company raised $900 million from investors. In addition, the digital asset platform Fireblocks raised US$310 million, with a market value of US$2 billion.

Arslanian explained that there are some challenges in pricing cryptocurrency startups. They include how to discount the regulatory risks of such an emerging industry and how to evaluate the valuation of companies. Another problem is the lack of companies to invest in, because most companies in the encryption field are still small and not well developed.

He further believes that:

If your lowest fare is about $50 million, there are not many companies with that status. If you are a large pension fund and you decide to make a cryptocurrency distribution, there are no more than 20 companies in the world that can invest, find funds, and absorb $100 million.

What do you think of Arslanian’s comments? Let us know in the comments section below.

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