Beleaguered cryptocurrency lender Vauld has been thrown a lifeline from larger competitor Nexo, in a sign of mounting consolidation in the crypto market.
Nexo said Tuesday it had signed a term sheet with Vauld giving it 60 days of exclusive talks to explore an all-equity acquisition of the company. If successful, Nexo said it plans to restructure the company and pursue an expansion in Southeast Asia and India.
Vauld on Monday paused operations and said it was exploring restructuring options due to “financial challenges” posed by a sharp plunge in cryptocurrencies. The Singapore-based company is backed by the likes of Coinbase and Silicon Valley billionaire Peter Thiel.
It’s the latest firm to get caught up in the chaos gripping the crypto world lately. In the last month alone, Celsius, another crypto lending firm, put an indefinite pause on withdrawals citing “extreme market conditions.” Meanwhile, Three Arrows Capital, a crypto hedge fund, applied for bankruptcy protection days after collapsing into liquidation.
Asked how much Nexo was willing to pay for Vauld, co-founder Antoni Trenchev said it was “premature” to speak about a valuation at this stage. However, he added he was “optimistic” about reaching a deal.
“We are starting the due diligence,” Nexo’s chief told CNBC. “We have a 60-day window of exclusivity where they will open up the books. You will see everything. Is there a hole? How big is the hole? Where are the assets? Who are the counterparties?”
Nexo previously gave Celsius a letter of intent offering to buy the company, however it said the company refused its offer.
With no government to turn to, several crypto firms have sought the help of their peers in hopes of a bailout instead.
Sam Bankman-Fried, the billionaire behind crypto exchange FTX, has become a lender of last resort for the industry. Last week, FTX signed a deal giving it the option to buy crypto lending firm BlockFi, while Bankman-Fried’s quant trading shop Alameda Research also extended a credit line to Voyager Digital, an embattled crypto brokerage that last week froze all operations.
Trenchev compared the current market situation to the “panic of 1907,” a series of bank runs that preceded the establishment of the Federal Reserve in 1913. Without a central bank to depend on at the time, the remaining lenders that survived the crash were rescued by top financiers, most notably J. P. Morgan.
“I do think we’re going to see a period of consolidation and mergers and acquisitions. And it will end up with 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 is down more than 50% since the start of 2022.