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The Liquidation Options Available For Crypto Firms

Samantha Mitchell

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When the Crypto industry became a multi-billion dollar industry, many companies in the sector also recorded such huge growths. Cryptocurrency exchanges are among some of the businesses that greatly benefited when this industry experienced a boom. Most of these companies only began as pet projects employing a few people but have now become excellent businesses.

Now that these companies have become established, they have to choose their preferred way of raising funds. IPO is one of the methods that these companies are choosing. Another way is through ICO where these businesses are tokenizing themselves. Lastly, some are going for rounds where they try to raise funds through private investors.

Acquisition Involves Sacrificing Ownership Rights

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According to Smart Valor, the CEO at Olga Feldmeier, the acquisition has emerged as the most popular liquidation method for many Cryptocurrency exchanges. Some of the exchanges she says have gone through this process include Bitstamp ($350 million) and Poloniex ($400 million). However, the big question is how the next generation exchanges dealing with security tokens and tokenized assets will fair.

In the last couple of months, Coinbase has been on an acquisition spree. The Cryptocurrency exchange has successfully acquired smaller firms and exchanges that include Paradex, Distributed Systems, Cipher Browser, and Earn.com. The latest reports by Finance Magnates claim that GoverMedia Plus Canada Corp. is planning to acquire EXMO, which is among the largest exchanges in Europe.

Nothing can explain this trend better than a sudden opportunity. For instance, during the acquisition of Bitstamp, CEO Nejc Kodrič admitted that they did not have any plans to sell the company. Instead, it is those wishing to join the sector who are approaching these companies according to the senior executive.

The acquisition is bringing various advantages such as allowing the companies to benefit from the parent company’s experienced staff and technology. However, this method means that the owners have to surrender their ownership right. In the case of Bitstamp, Damian Merlak, a co-founder surrendered his ownership while Kodrič retained a 10 percent stake.

Liquidation Through Tokenization

ICO is another method that established Crypto firms wishing to go public can use. Under this method, Cryptocurrency exchanges and other companies in the sector are creating their own Crypto tokens. The issuers of these tokens provide discounts to their users to encourage them to use them. This helps to keep as much cash as possible within the system.

Some Crypto firms are tokenizing themselves in such a way that those who acquire their tokens get an ownership stake. The move is aimed at encouraging more people to participate. Companies such as SPiCE VC, Science Blockchain, and Blockchain Capita are among those that have opted for this fundraising method.

IPO Gaining Popularity Among Crypto Firms

Some Crypto exchanges and firms in the sector are choosing to fundraise through the traditional method, IPO. Many businesses in the sector have been successful in raising funds through this method. According to Kepler.Finance, on August 6, 2018, Argo Mining raised £25 million (about $32.5 million) on the London Stock Exchange. The website reported that the company was the first Crypto firm to raise such an amount through IPO.

Kepler.Finance’s Samoilenko has said that Coinbase and Bitmain are the other giant Crypto firms that are expected to perform IPOs. Bitmain is the world’s largest Bitcoin mining company while Coinbase is a regulatory Cryptocurrency exchange. Kepler.Finance website provides free data on tokenized securities, funding rounds, and active blockchain businesses.

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