Bitstamp bought out for $400 million as it finds a “quality buyer”

Posted: 30 October 2018 5:44 pm
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A quality buyer, a quality offer and a smart time to get ahead of industry consolidation.

Bitstamp was one of the world's earlier cryptocurrency exchanges, kicking off in 2011. It's now the largest cryptocurrency exchange in Europe by most metrics.

As tech startups are wont to do, it started in the founder's basement with a small amount of cash and big dreams. In this case 1,000 euros and the vision of being one of the world's most reliable, trusted and safe places to trade cryptocurrencies, respectively.

The startup then went through its next life stages with quickly-growing interest and significant cash injections from investors in the space who saw potential in the fledgling brand, which helped it scale up. After 7 years it's now entering the next stage of the startup life cycle, with a $400 million buyout from Belgian investment firm NXMH.

Quality over quantity

Bitstamp has been courted by a number of interested suitors, said founder Nejc Kodrič in a press release. There were four bidders vying for Bitstamp in mid-2017, he elaborated in an interview with Fortune.

"We were not looking to sell," Kodrič said. "We were definitely not looking for investment because we didn't need to raise the capital."

But eventually it decided to go for it because the purchase just made sense on several fronts. The deal was actually struck last December, he says, but regulatory approval for the purchase has been filling most of the year to date.

"The reason why we finally decided to sell the company is a combination of the quality of the buyer, the quality of the offer and the fact that the industry is at a point where consolidation makes sense," the press release says.

Quality of the buyer

Kodrič says he sees a like-minded partner in NXMH.

"We were very much aligned - where we see the industry going and what the company wants to be," he said. "They’re willing to help us along the way, and help us with our global expansion."

One might also speculate that a non-like-minded partner wouldn't have lasted in the ongoing bear market, and might have gotten cold feet before finalising the deal. Sticking with it suggests a certain level of confidence in the cryptocurrency industry as a whole, and a belief in its staying power over the years.

Quality of the offer

The $400 million deal is not expected to see any changes on the customers' end. Kodrič will be staying on with the company, and retains a 10% stake in the company.

"We have kind of the same opinion as NXMH," he said. "Why change something if it works perfectly well?"

Industry consolidation

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Anecdotally there's an expectation of consolidation in the near future. It's a concern that might be held by a number of exchanges. Essentially, there might not necessarily be enough customers to sustain all the world's cryptocurrency exchanges, especially not with the global nature of the technology that might allow even a relatively new exchange to scoop up users from every market, and the ongoing cryptocurrency price slump.

NXMH also owns Korean exchange Korbit, which has prompted speculation of a merger between the two exchanges. But it's not on the cards, Kodrič says.

"We've talked about it, but we decided to keep the companies running separately," he said.

These kinds of deals might be an increasingly common part of the closing distance between traditional finance and cryptocurrency, as established players get more and more involved in the crypto side of things.

On the one hand it might be a positive sign of an industry growing up. On the other hand, it might show how easily the world of crypto-finance can slide under the thumb of established investment funds, which might not be especially thrilling for the more anti-establishment adopters.

Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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