There are always winners in times of crisis. While some cryptos default, others hunt for takeover candidates. 

An old stock market parable generally attributed to Warren Buffett appears to be coming true in crypto: «Only when the tide goes out do you discover who's been swimming naked». Crypto companies, particularly those that had questionable business models or were simply bad business, are going under. And after the crash in numerous coins or what have you, one thing has become increasingly clear. Cash is still king.

That means that fundamentally sound cryptos are out shopping, building partnerships, and hiring new staff. Many of the most established institutes are using the discounted valuations out there to strengthen and grow their businesses.

Light and Dark

The contrast currently being seen became very apparent over the weekend. Crypto-exchange OKX expanded its partnership with Manchester City and will sponsor the team's training kit for the upcoming 2022-2023 season. While OKX basks in the limelight of international club football, crypto-lender Celsius, which faces default, hired new restructuring lawyers according to the «Wall Street Journal» (paywall). 

Celsius foundered at the start of June, triggering the recent price dislocation in crypto-currencies. Bitcoin posted its worst half-year performance in its still young history. And Celsius, one of the largest lenders in the market, stopped all withdrawals and account transfers, signaling both the loss of trust and confidence and the liquidity crisis now facing the sector as a whole.

The most prominent victim has been Three Arrows Capital, a Singapore-based hedge fund. Founded in 2012 by two former Credit Suisse traders, it was one of the largest sources of capital in the crypto industry, investing in projects such as Solana, Avalanche, and Axie Infinity. Now, as finews.asia reported early Tuesday, the two co-founders appear to have gone missing.

Nexo Also Scours Market

The full extent of the crypto crisis is not yet visible. But as the market churns through takeovers and defaults, it also offers clear opportunity, as painful as that might seem to be. Zug-based crypto lender Nexo is in the market looking to buy. On Tuesday a week ago, it agreed, pending due diligence, to make a possible takeover offer for Singapore-based lender Vauld, another victim of the credit crisis enveloping the market. Nexo had even wanted to save Celsius but that deal was subsequently broken off. 

One of Nexo's co-founders, Antoni Trenchev, said in an interview with the industry portal «FN London» (paywall) that it is working with two Wall Street investment banks and talking to other companies about business opportunities. The hardest part of it all is figuring out which companies can be saved or not.

«A Few Billion»

Sam Bankman-Fried, the founder of the US crypto exchange FTX, has also been active. In June, FTX signed an agreement giving it the option of buying lender BlockFi for up to $240 million. Bankman-Fried's trading outfit, Alameda Research, previously purchased a minority stake in now-defunct Voyager Digital. And just last week the 30-year-old billionaire told «Reuters», that FTX has «a few billion» to help struggling companies.

The world's largest crypto exchange by trading volume, Binance, is also getting in on the action. Changpeng Zhao, the founder, told «Yahoo Finance Live» that «we're seeing that a number of firms are insolvent and a number of projects have gone under. But it's a small number in the grand scheme of things.». Zhao, known as «CZ»  in industry circles, said it is «looking at 50 to 100 deals».

Justin Sun, the controversial CEO of Tron, always ready with an apt media soundbite, told «The Block» that he is prepared to spend $5 billion helping struggling companies in the crypto sector.

Declining Transactions

The industry is facing a long and hard crypto winter. The number of transactions in the sector has continued to slow. Overall mergers and takeovers in the second quarter declined as market conditions worsened. According to PitchBook, there were 23 M&A deals in April, 20 in May, and 17 in June. The level of venture capital finance also fell, with PitchBook saying that the number of closed transactions was 157 in June, down from 249 in April.