Bitcoin, the world’s largest cryptocurrency, has fallen more than 50% since the beginning of 2022.
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Troubled cryptocurrency lender Vauld has been tossed a lifeline by larger competitor Nexo, in a sign of increasing consolidation in the crypto market.
Nexo said Tuesday it signed a term sheet with Vauld that gives it 60 days of exclusive talks to explore an equity-only takeover of the company. If successful, Nexo plans to restructure the company and drive expansion into Southeast Asia and India.
Vauld suspended operations on Monday and said it was reviewing restructuring options due to “financial challenges” brought on by a sharp plunge in cryptocurrencies. The Singapore-based company is backed by the likes of Coinbase and Silicon Valley billionaire Peter Thiel.
It is the latest company to get caught up in the chaos that has swept the crypto world of late. In the last month alone, Celsius, another crypto lending company, suspended payouts indefinitely, citing “extreme market conditions.” Meanwhile, Three Arrows Capital, a crypto hedge fund, filed for bankruptcy protection days after it collapsed into liquidation.
When asked how much Nexo was willing to pay for Vauld, co-founder Antoni Trenchev said it was “premature” to talk about a valuation at this point. However, he added he was “optimistic” about reaching an agreement.
“We start with due diligence,” Nexo’s boss told CNBC. “We have a 60 day window of exclusivity where they open the books. You will see everything. is there a hole how big is the hole Where are the assets? Who are the counterparties?”
Nexo had previously made a letter of intent to buy the company to Celsius, but said the company had rejected its offer.
With no government to turn to, several crypto firms have instead sought the help of their peers in hopes of a bailout.
Sam Bankman-Fried, the billionaire behind crypto exchange FTX, has become the industry’s lender of last resort. Last week, FTX signed a deal that gave it the option to buy crypto lending company BlockFi, while Alameda Research, Bankman-Fried’s quant trading shop, also bought Voyager Digital, an embattled crypto broker that froze all operations last week , granted a line of credit.
Trenchev compared the current market situation to the “panic of 1907,” a series of bank runs that preceded the creation of the Federal Reserve in 1913. With no central bank to rely on at the time, the remaining lenders that survived the crash were bailed out by top financiers, led by JP Morgan.
“I think we’re going to see a period of consolidation and mergers and acquisitions. And in the end there will be fewer companies but stronger ones with better business practices,” he said.
Bitcoin had its worst month on record in June, losing more than 38% of its value. The world’s largest cryptocurrency has fallen more than 50% since the beginning of 2022.