Circle acquisition of Poloniex is just the beginning of likely consolidation in crypto

By: Evelyn Cheng

News Monday that digital payments company Circle has bought cryptocurrency exchange Poloniex is stirring speculation of more acquisitions in the young digital currency world.

“I think this is a really good sign for the industry. It shows that a lot of companies are going to start consolidating and that will bring [out] the best talent,” said Erik Voorhees, an early investor in bitcoin who is now CEO of digital asset exchange ShapeShift. “I think you’re going to see a lot of that in 2018. These companies have so much capital at this point.”

Venture capitalists and other early stage investors put $1.06 billion into the crypto-economy in 2017, according to Lex Sokolin, global director of fintech strategy at financial research firm Autonomous Next. For the year so far, such investments stand at $323 million.

Investment in crypto-economy ($ millions)

Source: Autonomous Next

The entire cryptocurrency market capitalization has also grown from around $20 billion at the start of last year to around $500 billion in the last few weeks, according to Bitcoin, the largest cryptocurrency by market cap, is up several hundred percent over the last 12 months and was trading near $10,000 Monday.

“These markets are still in their infancy but they hold enormous promise,” Circle co-founder and CEO Jeremy Allaire told CNBC in a phone interview Monday. “There’s going to be a huge amount of value creation.”

“Maybe the first $1 trillion company in the world will be created in this space,” he said.

Goldman Sachs and China-focused investment firm IDG Capital Partners are investors in Circle, which has raised a total of $136 million and has a valuation of at least $420 million, according to PitchBook.