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 Blockchain startup Coinsquare acquires P2P marketplace StellarX

 

Blockchain startup

 

Canadian crypto trading platform Coinsquare recently acquired StellarX, a decentralized peer-to-peer marketplace based on Stellar network that has zero transaction fees, according to a press release by business wire.

 

This development comes exactly a year after Coinsquare managed to raise as much as $28 million in private funding from Canaccord Genuity group as part of a series B round, according to InWara’s Private Funding Database. In retrospect, the crypto exchange had raised $13 million in 2017 through two funding rounds, out of which $5 million was raised solely from seed funding round. Cole Diamond, CEO of Coinsquare was quoted saying “We are deeply committed to ensuring that the cryptocurrency market thrives, and adoption is key” further adding “Stellar is the fastest payment network in the world and we see enormous potential to create industry leading services on StellarX to further broader adoption” indicating Coinsquare plans on leveraging Stellar’s cutting-edge technology to augment their own platform. Interestingly according to InWara’s M&A database, the firm also acquired BlockEQ, a stellar based crypto wallet, in December 2018 for a cool $9 million. It appears that Coinsquare has tied its destiny unequivocally to that of Stellar — Is that wise?!

 

StellarX is a peer-to-peer decentralized trading platform based on Stellar network. Interestingly StellarX allows its users to trade various fiat currencies for crypto, which is unusual among decentralized exchanges. StellarX claims to be the first decentralized exchange with global fiat payment gateways. Users have complete autonomy over their digital assets and since trading is peer-to-peer, there are no middlemen and no transaction fees. 

 

The strategic rationale behind this acquisition becomes clear when considering the significant benefits of Stellar’s platform. Stellar network is supposedly more advanced and able to handle much higher transaction rates than competing networks. The same technology would give Coinsquare the edge over competing trading platforms. Coinsquare is the latest member in the group of trading and investing startups to acquire strategic partners to help augment their own platform.

 

# of M&A deals, sector wise

Source: InWara’s M&A database

 

M&A activity in the trading and investing sector is the highest across the blockchain and crypto space, which is surprising given that Financial services sector dominates the blockchain and crypto space in terms of ICO numbers and funds raised. Till date, 40 M&A deals took place in trading and investing sector, which is akin to ~14% of the all M&A deals in the crypto space, indicating that the trading and investing sector is highly competitive. Financial services account for ~11% of all M&A deals. M&A deals in any nascent space usually indicates the market is consolidating and maturing.

Related Reading: The top 3 crypto M&A deals that stole the limelight in April

 

Competition brewing

 

Coinsquare is a trading platform for cryptocurrencies. This market space is highly competitive where aggressively acquiring startups to gain a technological edge is the norm. Here are some of the noteworthy ones.

 

Kraken

 

Kraken is one of the largest Bitcoin exchanges in the world, the exchange has raised as much as $6.5 million from VC firms such as Digital Currency Group, Blockchain Capital among others, InWara’s private funding database. Kraken recently made headlines, when it acquired UK based crypto trading and indexing platform Crypto Facilities for north of a $100 million, according to Inwara’s M&A database. Krakens acquisition of Crypto Facilities marks its 6th acquisition to date. Previous acquisitions include trading and portfolio tracking platform Cryptowatch, digital wallet-funding service Glidera, and several major bitcoin exchanges such as Coinsetter, Cavirtex and CleverCoin. To understand the strategic rationale behind Kraken’s acquisitions check out InWara’s article.

 

Coinbase

 

Coinbase is a San Francisco based crypto trading platform that also doubles as a digital wallet. Coinbase enables users to create their own bitcoin wallet, then facilitate the trading on Bitcoin using it. Incredibly Coinbase has raised as much as $540 million from veteran blockchain and crypto VCs such as Digital Currency Group, Andreessen Horowitz, Tiger global management, Y combinator among various other premier firms, according to InWara’s private funding database. A majority of these funds were single-handedly raised as part of a series E funding round which was valued at $300 million. In retrospect, Coinbase has been a prolific acquirer of blockchain and crypto startups. The latest being the acquisition of data handling startup Blockspring for an undisclosed amount. The Blockspring deal marks Coinbase eleventh acquisition in the space. To know more about Coinbase’s portfolio check out InWara’s article

 

StellarX a threat to Coinbase?

 

A potential reason as to why investment and trading sector is competitive is because of the nature of the market. For users to buy and sell cryptocurrencies, there needs to be a trusted intermediary or a broker to facilitate the transaction and hence function like a traditional stock exchange. This “conventional” perspective could dramatically change with the introduction of a decentralized exchange like that of StellarX. The advantages of little to no transaction fees, the direct trade between the buyer and seller and ‘significantly reduced risk’ from hackers. In spite of these advantages, decentralized exchanges currently have low trade volume and sub-par levels of liquidity. Thus decentralized crypto exchanges (DCEx) like StellarX don’t immediately pose a threat to centralized crypto exchanges (CCE) like Coinbase despite DCEx’s providing the benefits of decentralized blockchain network.

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