Crypto ‘Secondaries’ Prices Climb as IPO Excitement Builds

Crypto 'Secondaries', Crypto ‘Secondaries’ Prices Climb as IPO Excitement Builds
Crypto ‘Secondaries’ Prices Climb as IPO Excitement Builds

YEREVAN ( — Crypto funds and private investors are actively buying shares of private digital-asset companies. This anticipation is driven by the expectation that some of these companies might go public soon. This renewed interest is driving up the prices of these so-called crypto “secondaries” – shares or tokens held by former or current employees or early investors.

Active Trading and Rising Prices in Crypto Equities

Equity in companies such as Circle Internet Financial, Kraken, and Chainalysis is trading more actively. Many of the deep discounts seen a year ago have now declined. According to multiple trading venues, crypto buy-side demand in the first half of 2024 is 28% higher than the second half of 2023 and 126% higher than the first half of 2023, reports Forge Global, a secondary market platform.

Prices of secondaries have risen along with demand. The implied prices for equity in Kraken have jumped 77% year-to-date. Ripple has seen a 13% increase, while Chainalysis has experienced a 17% rise, based on Forge’s platform activity.

“There’s strong individual investor demand,”

said Andrew Saeta, co-head of institutional sales at Forge.

“On the institutional side, we’ve seen a significant increase. The market is the most robust it’s been in awhile.”

Bitcoin Rally and Regulatory Shifts Boost Cryptocurrency Market

A rally in Bitcoin during the first half of 2024 has been a significant driver of this renewed interest. Bitcoin reached new highs in March, partly due to the launch of US exchange-traded funds investing directly in the cryptocurrency.

Bitcoin Price Movement and Key Events (Jul '23 - Jun '24)

Source: CoinMarketCap
Bitcoin Price Movement and Key Events. Source: CoinMarketCap

Additionally, a recent regulatory shift on Ethereum has contributed to this positive market sentiment.

Crypto policy has even become a topic in the upcoming presidential campaign. Coinbase Global Inc. has jumped 36% this year, making similar private businesses appear more attractive.

Crypto 'Secondaries' Source: Zacks Investment Research
Source: Zacks Investment Research

FTX Collapse Slows Crypto Market

The secondary market faced significant challenges following the collapse of FTX in 2022. As crypto prices fell, the industry entered a so-called “crypto winter,” further reducing demand.

The Collapse of FTX (Nov 2022)

The Collapse of FTX (Nov 2022). Source: techtarget

“There’s been less activity since FTX,”

said Brian Dixon, CEO of Off The Chain Capital.

“Many institutional investors were scared. Now, we are starting to see more activity. As blockchain companies’ revenues increase, we expect more institutional investors to acquire these secondary assets.”

As of May, 25% of Dixon’s $370 million fund comprised secondaries.

“Valuations have increased, but demand hasn’t risen as much,”

noted Taran Sabharwal, CEO of Stix, a marketplace for over 50 tokens.

Investors Eye Strong Performance

Investor Haun Ventures acquired shares in Fireblocks and Chainalysis at deep discounts about a year ago. Despite the increased activity, many secondaries still trade at 40% to 70% discounts compared to their latest round.

“It’s a good time to re-evaluate secondary assets,”

said Stan Miroshnik, founder of TenSquared Capital.

“Many larger crypto companies have shown strong operating performance over the last six months. The fundamentals have improved significantly.”

Above all, if crypto prices continue to rise, the next year-and-a-half could see the largest wave of crypto-related IPOs on record. According to IPO researcher Renaissance Capital, up to 15 companies might go public. Kraken is reportedly in talks for a pre-IPO round, and crypto has become a political issue in this year’s US presidential election.

“A lot of people are excited about the prospects,”

added Saeta of Forge.

“Especially since there are likely to be changes from the regulatory perspective.”

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