When it comes to projects in the crypto space, users anticipate various blockchain functionalities to maximize their profits. On the other hand, projects look forward to delivering valuable tools and products to the developing financial world of digital assets. However, certain aspects may lead these projects into a merger deal. The overall goal is of expanding beyond their current scope. A merger is a voluntary partnership between two companies/projects into one entity.
A merger’s success is determined by the type of terms both companies agree on, which in most cases, ends on equal ground. So what do you do if a crypto project you’ve invested in is caught up in a merger?
Actions to Take in Case of a Merger
Once your favorable crypto project collaborates with other ecosystems to become one, you can take the following approaches:
Evaluate the Outcome
Customers estimate what they stand to gain after the integration procedures. Crypto projects operating independently can charge more, especially if there are limited competitors in the market. However, a merger saves the customer’s hard-earned money since the products and services in place will go for a cheaper rate.
Customers also experience newer functionalities that were not available initially when the crypto project operated separately. The merging event may introduce new features such as a cold storage system that stores the customer’s funds in an offline location.
Secure Asset Fund for Users is an additional option that may be included during the merger. SAFU measures ensure users recover their crypto assets in the event of a hack or any event leading to losses. Customer service grows exponentially after a partnership since more representatives will act on the customer’s complaints.
By evaluating such outcomes, the customer can deduce the positives emerging from the crypto mergers and leverage them to encounter minimal risks.
Research on the Collaborating Entity
It is crucial to find out more about the entity coming on board, in terms of who they are, their past performances, and reputation, just to mention a few. Usually, customers prefer investing in an entity that brings mutual benefit to the table.
For instance, customers may hesitate to operate in a crypto platform with inadequate security mechanisms, malicious developers waiting to pump a project, dump it afterward, or continuous conflicts with financial watchdogs.
If the entity intending to onboard a crypto project displays such features, users will refrain from engaging with it as no one would want to incur financial losses in the end.
On the other hand, if the new project has a positive track record, customers will definitely rely on the merger. This is because they are fully aware of both projects’ potentials they can bring if combined under one umbrella.
Monitor How the Merge Handles Competition
It is common to see customers switch from their go-to crypto projects to other projects amid a merging event. Competitors seize this opportunity to capture customers who are skeptical of the partnership by offering lucrative deals such as improved APYs, lower gas fees, convenient lending terms for crypto loans, and much more.
To mitigate this issue, the newly founded project needs to persuade and clarify to users that the changes will only be minimal. Moreover, the crypto project can assure customers that the services they usually offer will not be interfered with in any way.
Look Out for Any Announcement Material
Before and after a merger, an announcement will usually be published to keep every customer in the know. Effective communication is essential during a crypto merger since investors feel confident of where the partnership is headed.
Projects that focus or address more on an investor’s interests ultimately attract new and existing customers. Moving forward, the merging crypto projects will understand the customer’s pain points and communicate solutions during the integration decision.
Types of Mergers
Crypto projects opt to use various forms of mergers, including:
A concentric merger takes place when two crypto projects in one market offer different yet related products. In a concentric merger, the crypto platforms aim at bringing more users onboard. This is done by combining their products and services into one network.
Here, crypto projects that are direct competitors decide to fuse their functionalities under one name. In essence, the two ecosystems have similar offerings and customers but decide to join hands to boost market shares.
Under this merger, crypto platforms with entirely different activities collaborate to expand their products to more customers beyond the current state. Typically, it takes place between projects in distinct industries and different locations.
The newly established crypto firm may start exercising monopolistic powers, leading to an increase in prices for consumers. This situation is evident, particularly when the platform has a broader market share and limited competition.
Diseconomies of Scale
Efforts to empower the crypto project’s team may become futile after partnering with another platform to become one. The level of control may grow to be uncontrollable and power clashes can happen, a factor that would affect the project’s operations. Once the crypto project’s team realizes they are just part of a robust ecosystem, their drive could decrease significantly and negatively impact the platform’s performance.
Generally, crypto projects indulge in mergers to widen their activities in the market. However, users have to be on the lookout for any changes that will emerge as a result of the partnership.
As displayed above, combining into one platform presents its downsides which may negatively affect the investment plans of an ordinary user. On the flip side, it could lead to the introduction of new products or improved services and response rates.
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