CEO Brian Armstrong stated that the company’s strong $9.9 billion cash position enables even more strategic acquisitions, particularly internationally. The timing aligns with Coinbase’s upcoming inclusion in the S&P 500, which fueled a 50% stock surge over the past month.
Meanwhile, crypto VC funding dynamics are shifting. Although deal volume dropped by 40% year-over-year in Q1 of 2025, total investment more than doubled to $6 billion. Most capital went to infrastructure and financial service firms. However, some startups may be missing out on funding due to inflated valuations, according to 10T Holdings' Dan Tapeiro.
Coinbase Acquisition Strategy Gains Momentum
Coinbase CEO Brian Armstrong recently reaffirmed the company’s intention to continue pursuing merger and acquisition (M&A) opportunities after its landmark $2.9 billion deal to acquire Deribit. In an interview with Bloomberg Television on May 14, Armstrong explained that the company is more than ready to deploy its financial resources toward strategic acquisitions.
He explained that Coinbase ended the first quarter with $9.9 billion in US dollar resources, which means that it has a very strong balance sheet that gives the firm a lot of flexibility. “We are always looking at M&A opportunities,” Armstrong said, though he stressed that the company is still very selective: “We want it to be the right opportunity.”
The acquisition of Deribit involved $700 million in cash and 11 million Coinbase shares, and is the largest in the crypto industry to date. It was also Coinbase's entry into the lucrative crypto derivatives market, a move seen as critical to its ongoing global expansion.
Armstrong indicated that the company is focused on international targets, especially companies that align with Coinbase’s mission and are capable of accelerating product development and growth. However, when asked specifically about rumors surrounding a possible acquisition of stablecoin issuer Circle, Armstrong declined to comment by stating that there was “nothing to announce.”
Circle isa key Coinbase partner, and recently filed to go public. It was also previously the target of a $5 billion bid from Ripple, which was ultimately rejected.
Coinbase’s bold acquisition strategy comes as the company prepares to become the first crypto-native firm to join the prestigious S&P 500 index on May 19. The inclusion is expected to help broaden Coinbase's investor base and increase exposure to passive investment funds that track the benchmark index.
Coinbase share price over the past month (Source: Google Finance)
The company’s stock surged 2.5% in after-hours trading to $263. COIN shares climbed by over 30% since the start of May and nearly 50% over the past month, buoyed by the Deribit deal and the upcoming S&P 500 listing.
Fewer Crypto Deals But More Money in Q1 2025
Venture capital activity in the crypto sector saw a big shift in the first quarter of 2025, according to PitchBook’s latest Crypto VC Trends report. While the number of deals declined quite a bit compared to a year ago, the overall value of those deals surged. This could mean that there is renewed confidence in core crypto infrastructure.
The report was released on May 14, and it revealed that 405 deals were made during the quarter, down nearly 40% from the 670 that were recorded in Q1 of 2024. However, it was still an increase from the 372 deals seen in Q4 of 2024.
Despite the drop in deal volume, the total capital invested more than doubled year-over-year, hitting $6 billion in Q1 2025 compared to just $2.6 billion in the same quarter last year. This also represented a steep climb from $3 billion in Q4. PitchBook’s senior crypto research analyst, Robert Le, said that despite ongoing macroeconomic uncertainty, investors continued to allocate funds toward the foundational elements of the crypto ecosystem.
VC funding by segment (Source: PitchBook)
A large portion of the funding—almost $2.55 billion—was concentrated in just 16 deals involving crypto asset managers, exchanges, and financial services firms. Crypto infrastructure and development companies followed, and raised close to $955 million across 30 deals.
Looking forward, Le specifically pointed to Circle’s upcoming IPO as a pivotal moment for the industry. He argued that its valuation could set a benchmark for future exits and help restore confidence in late-stage crypto equity. A valuation exceeding the estimated $4 to $5 billion range could attract more capital and elevate valuations across payment and infrastructure segments. Circle has raised $1.18 billion in venture funding so far, and PitchBook estimates a 64% probability it will eventually go public.
Stablecoins also stood out in Q1, with their market cap growing from $202.3 billion to $227.1 billion. This happened even after the broader crypto markets remained flat or declined. Le said that dollar-based settlement continues to be crypto’s standout use case. He expects increased investment in startups focused on payment, remittance, and treasury management that benefit from stablecoin transaction flows.
Finally, the $1.4 billion Bybit exploit in February, which was the largest in crypto history, is likely to drive more demand for tools like real-time proof-of-reserve systems, improved custody technologies, and simplified key management solutions. Le suggested that startups operating in these areas may find a more welcoming funding environment.
Crypto Startups Overprice Themselves Out of VC Deals
Despite the fact that the value of crypto VC deals are going up, crypto startups may still be missing out on critical funding opportunities by seeking unrealistically high valuations. This is according to Dan Tapeiro, CEO of 10T Holdings.
Dan Tapeiro at the Consensus conference
At the Consensus conference in Toronto on May 14, Tapeiro criticized founders for trying to raise capital at valuations between 50 to 80 times their revenue, a multiple he says is unsustainable for venture capital firms trying to generate returns for their investors. He explained that even when 10T Holdings is impressed by a project, they will pass if the valuation is unreasonable from the outset. So far, this approach led the firm to reject more than 200 potential investments, including high-profile names like FTX, BlockFi, and Celsius.
Tapeiro explained that his firm looks for crypto companies with valuations of at least $400 million to $500 million but insists that a reasonable valuation-to-revenue ratio—ideally no higher than 10x—is critical for long-term success. He added that realistic valuations not only improve the potential upside but also ease follow-on fundraising and simplify eventual exits.
Despite these concerns, PitchBooks’s report indicated that the broader venture capital environment seems healthy.
Also on the panel was Dan Morehead, CEO of Pantera Capital, who offered a different view. He suggested that investors should aim for a balanced mix of equity and tokens when backing crypto startups. According to Morehead, different market cycles cause tokens and equity to alternate in value, making diversification a strategic advantage.
