It has been a week of bumper valuations in the world of crypto and blockchain. Galaxy Digital [GLXY] is set to acquire BitGo for $1.2bn, while Bitso has become the first blockchain unicorn in Latin America, with a $2.2bn valuation. We take a look at these stories, plus the latest moves in dogecoin [DOGE] as it sets a new high at $0.740 before plunging over the weekend – is it still heading towards $1?
Looking at the wider sector on our thematic performance screener, the Blockchain theme has slipped 2.05% over the last week to 9 May, which places the theme mid-table among the other themes tracked. In comparison, the S&P 500 gained 1.40% last week to 7 May’s close.
Gains of the Blockchain theme over the past week to 9 May
Can Dogecoin hit $1 after Musk’s SNL appearance?
When social media users claimed dogecoin could hit $1 last year, it was scarcely believable. DOGE ended 2020 at just $0.0047. On Saturday afternoon (UK time), DOGE was trading at $0.716, up an astonishing 15,134% this year and giving the popular altcoin a market cap over $90bn. It isn’t a surprise, then, that some analysts reckon the $1 level is a matter of when, not if – Seeking Alpha’s Logan Kane for one “would not be surprised if Dogecoin hit $1.”
However, billionaire Tesla [TSLA] CEO and self-proclaimed “Dogefather” Elon Musk’s appearance and mention of the meme altcoin on US TV show Saturday Night Live precipitated a huge sell-off. DOGE sunk as low as $0.418, before recovering to $0.440 by mid-afternoon on Sunday 9 May, a plunge of 39.41% in 24 hours, according to Coindesk, with $33bn wiped off its market cap.
Despite his belief that dogecoin will rise to $1, Kane doesn’t “see much value in dogecoin” in the longer-term. This is one crypto, perhaps more than any other, whose rise has been fuelled by social media and online investor forums, and where the vast majority of ownership rests with a few wealthy investors – an issue previously raised by Musk, who said in February that he would back major owners if they sold.
Economists believe millions of US government COVID-19 payments helped fuel the rise, as more affluent recipients invest in cryptos. The worry is that the phenomenal rise could unravel just as quickly, because dogecoin “has no intrinsic value; relying on investment hype, speculation, and fear of missing out”, writes the Guardian’s Richard Partington. Traders of Crypto founder, Antony Portno, said to the Independent: “On face value, it’s a complete mystery as to why dogecoin continues to grow … social media has been the key contributor … it’s become an anti-establishment rebel coin.”
“On face value, it’s a complete mystery as to why dogecoin continues to grow … social media has been the key contributor … it’s become an anti-establishment rebel coin” - Traders of Crypto founder, Antony Portno
However, Investing.com analyst Jesse Cohen reckons the coin can rise beyond $1: “we see a greater likelihood that dogecoin will reach the $1 mark in the coming days, with probability rising for DOGE to rally as high as $5 later in 2021”, thanks to ”growing acceptance by retail traders and mounting support from high-profile billionaires.”
Despite the sharp decline over the weekend, Dogecoin has come a long way for a crypto initially created as a joke. With its meteoric ascent so far, $1 still looks possible. As for how high it can ultimately go, and how long it will last, only time will tell.
Galaxy Digital buys BitGo in first $1bn crypto deal
The Canadian-listed digital asset merchant bank, Galaxy Digital, has agreed to buy California-based BitGo, the crypto custody and wallet start-up, for $1.2bn, marking the crypto sector’s first $1bn deal. The acquisition will mean Galaxy has more than $40bn in assets under custody, according to the Wall Street Journal. Galaxy’s share price has been on a tear over the last year, up a whopping 2,379% from $1.32 to $32.72 at the close on 7 May.
The combined company will offer a vast range of products and services, “including trading, custody and asset management, investment banking, prime lending, tax services and even a mining operation, aimed mainly at institutional investors”, reports the WSJ. "The acquisition of BitGo establishes Galaxy Digital as a one-stop shop for institutions and significantly accelerates our mission to institutionalise digital asset ecosystems and blockchain technology," said Galaxy CEO and founder, Michael Novogratz.
“The acquisition of BitGo establishes Galaxy Digital as a one-stop shop for institutions and significantly accelerates our mission to institutionalise digital asset ecosystems and blockchain technology” - Galaxy CEO and founder, Michael Novogratz
BitGo CEO, Mike Belshe, will become Galaxy’s deputy CEO, while BitGo shareholders will own circa 10% of the combined company, reports Coindesk. The deal is expected to be finalised in Q4, subject to approval from regulators and Galaxy shareholders.
Bitso becomes first crypto unicorn in Latin America
Crypto platform Bitso’s announcement last week that it raised $250m in its latest Series C funding round, has taken the Mexico City firm to a valuation of $2.2bn, making it the first crypto company in Latin America to gain unicorn status. This latest funding round, which followed December’s series B raising of $62m, was led by hedge fund giant Coatue and investment firm Tiger Global, report Forbes. The firm, which already has a 95% share of the crypto market in Mexico and over 60% in Argentina, has now also started operating in Brazil.
In January, Bitso became one of nine approved firms in Colombia’s regulatory banking services pilot for crypto firms and, in February, it acquired Gibraltar-based crypto derivatives platform Quedex, report Coindesk. The firm, which has over 2 million customers, enables users to buy, sell, send or receive up to nine cryptos through its app. Bitso’s co-founder and CEO, Daniel Vogel, said “we want to make sure that folks in the region really benefit from accessing these global financial services that are getting built on top of blockchain.”