December 5, 2023

Bitcoin, the world’s largest cryptocurrency, has fallen by more than 50% since the start of 2022.

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The lifeline of embattled crypto lender Fuld has been dumped from bigger rival Nexo, in a sign of the growing consolidation of the crypto market.

Nexo said Tuesday it has signed a term sheet with Fuld giving it 60 days of exclusive talks to explore the acquisition of all shares in the company. If successful, Nexo said it plans to restructure the company and pursue expansion in Southeast Asia and India.

Fuld halted operations on Monday and said it was exploring options for restructuring due to the “financial challenges” posed by the sharp decline in cryptocurrencies. The Singapore-based company is backed by the likes of Coinbase and Silicon Valley billionaire Peter Thiel.

It’s the latest company to get caught up in the chaos sweeping the crypto world lately. In the past month alone, Celsius, another crypto lender, has indefinitely suspended withdrawals citing “extreme market conditions.” Meanwhile, Three Arrows Capital, a cryptocurrency hedge fund, has filed for bankruptcy protection days after collapsing in liquidation.

Asked how much Nexo was willing to pay for Fuld, co-founder Anthony Trenchev said it was “too early” to talk about an appraisal at this point. But he added that he was “optimistic” about reaching an agreement.

“We’re starting our due diligence,” the Nexo president told CNBC. “We have an exclusive 60-day window where they will open the books. You’ll see everything. Is there a gap? 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, but said the company rejected their offer.

With no government to turn to, many crypto companies have sought help from their peers in hopes of a bailout instead.

Sam Bankman-Fried, the billionaire behind crypto exchange FTX, has become the industry’s lender of last resort. Last week, FTX signed a deal giving it the option to buy crypto lender BlockFi, while Bankman-Fried’s Alameda Research quantitative trading store also extended a line of credit to Voyager Digital, a beleaguered crypto broker that last week had frozen all operations.

Trenchev compared the current market situation to the “Panic of 1907,” a series of bank outflows that preceded the creation of the Federal Reserve in 1913. Without a reliable central bank at the time, the remaining lenders that survived the collapse were bailed out by major financiers, most notably JP Morgan.

“I think we will see a period of mergers, mergers and acquisitions. We will end up with fewer companies, but stronger companies with better business practices,” he said.

Bitcoin had its worst month ever in June, losing more than 38% of its value. The world’s largest cryptocurrency has fallen by more than 50% since the start of 2022.

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