North American $500M Fund Scours for Bargain Buys in Leading Crypto Firms
The emergent investment opportunities within the cryptocurrency sector are attracting investors, with market observers bullish in their Bitcoin prediction. Traders are riding on the bullish wave, thereby pushing the world’s largest digital currency to test the $44,000 resistance level.
Bitcoin rally is propelling a bullish momentum spread across several cryptocurrencies, leaving the prices at a two-year high.
C1 Seeks Bargain Buys in Crypto Firms
Beyond the quest for spot Bitcoin exchange-traded fund (ETF) by Wall Street firms, Silicon Valley-based Crypto 1 is pursuing leading crypto firms in Australia. The North American firm is seeking bargain buys for its AUD 760 million fund.
The fund targets discounted secondary shares in the firms, including the blockchain-based gaming enterprise Animoca Brands. The California-based firm with an operating base in the United Arab Emirates is targeting the once-listed firm on the ASX-listed firm using the $ 500 million fund.
C1 Fund is an entity established by former Coinbase lawyers and investors who have held conversations with multiple local venture firms. The meetings feature a mandate to acquire secondary shares up to 80 percent below their recent valuation.
Representatives drawn from the C1 Fund have in the meetings explicitly offered to acquire private holdings from the investors. They are offering to pay between 50% and 80% less per share relative to the last valuation.
A pitch deck that The Australian Financial Review accessed reveals that the C1 strategy targets digital firms capped at a minimum of $300 million from their latest funding round. The firm prefers crypto firms in their Series C round and later phases, offering cheques that range from $US20M to $US50M.
The Australian Financial Review reported that the C1 Fund investors cite the prevailing market conditions within the private and public markets to seek the huge discounted offer. The publication adds that the markets face hyperinflation and increasing interest rates, making the crypto assets sector very attractive valuations within the secondary market.
CI Fund Pursues Animoca and Chainalysis
Among the companies sought by C1 Fund is Hong Kong-based Animoca, led by Yat Siu. The firm recently exited ASX listing at a valuation of $120M back in 2020 for alleged swapping stock for digital assets tokens. Since the delisting, Animoca’s value has ballooned to a $7.8 billion private entity backed by Sydney-based Koda Capital and KTM Ventures.
A review of the last capital raise at Animoca saw the shares sell at $4.50. CI Fund is offering to acquire the shares at $1.12.
Also roped into the C1 sights is blockchain analyst firm Chainalysis, which is involved in investigating services for law enforcement agencies and contracted companies.
The US-based Chainalysis, in the previous valuation in 2022, commanded $8.4 billion. C1 Fund informed its investors of the availability of $30M secondary preferred shares priced at $15. This represents 63 percent less value than the firm’s last capital raise.
Immutable Excluded From C1 Fund Targets
The Australian Financial Review inquired whether crypto gaming developer Immutable has received offers from the CI Fund. The high-profile entity in the gaming segment ruled out being on the C1’s radar and admitted raising closer to $400 million in venture capital.
Immutable concluded the Series C fundraising, where the Sydney-based company realized a $2.5 billion valuation.
Further scrutiny into Immutable activities reveals that it discounted the shares offered to its staff by nearly two-thirds of its valuations. Immutable ruled out contact with CI Fund and neither its investors with an aim to acquire secondary shares.
Immutable disclosed that its last sale in the secondary market featured the US venture firm PrinceVille, which was valued at $2.5 billion.
Investors in Crypto Firms Unlikely to Cash on Discounted Value of Investment
Although C1 Fund portrays itself as a partner seeking to help venture investors free their cash, a few are willing to let go of the investments they held during the prolonged crypto activity downturn.
Australians are embracing the local crypto exchanges Independent Reserve and BTC Markets as they ditch Binance following the guilty plea by its founder for money laundering charges. The locally regulated platforms are realizing over 50% surge in trading volumes.
It is unlikely for the existing investors in crypto-affiliated firms to cash their investment at discounted value at a time when a modest recovery is witnessed across the crypto industry. Months preceding the recent rally saw crypto prices and firms’ valuation dip as the sector battled crypto frauds.
The segment is set for a sustained turnaround in the prospect of the US Securities and Exchange Commission (SEC) approving a dozen applications for spot Bitcoin ETF. Market observers and investors are in support of ETF approval, citing likely uptake for crypto from Wall Street institutions, including BlackRock and Cathie Wood’s Ark Invest. Such uptake would likely trigger more inflow into cryptocurrency.
Crypto investors anticipate a huge price recovery driven by a technical upgrade scheduled for May on the Bitcoin network. The upgrade is set to halve the tokens Bitcoin miners earn in line to cap the supply at 21 million units. Investors expect a replication of price recovery that, on each of the last occasions, pushed the Bitcoin price to record levels.
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