By Alexander Osipovich and Vicky Ge Huang

President Trump's embrace of digital currencies has unleashed a flurry of crypto deals, with companies seeking to capitalize on lighter U.S. regulation and what they hope will be growing mainstream interest in the sector.

This week brought the debut of Twenty One Capital, a new bitcoin company that plans to go public through a $3.6 billion merger with a special-purpose acquisition company led by Brandon Lutnick, son of Commerce Secretary and close Trump confidant Howard Lutnick.

With deep-pocketed backers such as Tether and Japan's SoftBank Group, Twenty One plans to amass billions of dollars of bitcoin and issue debt to acquire more -- a highly speculative business model pioneered by software maker turned bitcoin investor MicroStrategy.

The Twenty One merger is the third crypto deal valued at more than $1 billion to be announced in less than two months. It comes as dealmaking more broadly has slowed down, because of market volatility sparked by Trump's tariffs and uncertainty over how aggressive the new administration will be on antitrust policy.

Earlier this month, Ripple agreed to acquire prime broker Hidden Road for $1.25 billion, betting that institutional investors will want to step up their exposure to crypto. And digital-currency exchange Kraken struck a $1.5 billion deal for futures broker NinjaTrader in March, one of the biggest tie-ups to date between trading platforms in crypto and traditional assets.

Meanwhile, Galaxy Digital is planning a mid-May direct listing on the Nasdaq after the Securities and Exchange Commission gave it a long-awaited green light. The crypto financial services company, currently listed on the Toronto Stock Exchange, has been trying to secure a U.S. listing since 2021. It will continue to be listed in Toronto after the Nasdaq listing.

In all, crypto firms have struck 88 deals with a total transaction value of $8.2 billion so far this year, according to data from advisory firm Architect Partners. That is nearly triple the transaction value from 188 deals in the industry in all of 2024, the data shows.

"There's optimism that finally things changed," said Eric Risley, founder of Architect Partners. "The traditional crypto players that are large and at scale are now back in a growth-minded mode, and one of the tools that they have for growth is acquisitions."

This year, the industry is well-positioned to break the dealmaking record set in 2021 when a robust crypto bull market fueled about $17 billion worth of transactions, Risley added.

Just over two years ago, crypto dealmaking slumped after the collapse of Sam Bankman-Fried's FTX triggered a regulatory crackdown and depressed token prices. Now, with Trump back in the presidency, many bankers and advisers anticipate a boom in digital-asset deals.

Trump has appointed crypto-friendly regulators and pledged to make the U.S. the "undisputed bitcoin superpower," while the Republican-led Congress is working to advance bills to establish a regulatory framework for digital assets.

"It's been a much more positive atmosphere from a digital-asset dealmaking perspective than any time before," said Alexander Yavorsky, co-head of investment banking for global financial institutions at Jefferies.

Ryne Miller, co-chair of the crypto practice at law firm Lowenstein Sandler, predicted that there would be more tie-ups this year between traditional financial firms and crypto companies. He also expects acquisitions by crypto businesses looking to add regulatory licenses or expand their U.S. customer base.

Outside of crypto, mergers-and-acquisitions activity has been slow, Miller said. But "in crypto, it's different," he said. "There is a genuine interest in the market in taking advantage of this regulatory moment."

The latest big crypto deal is aimed at giving investors a way to make leveraged bets on bitcoin, the oldest and largest cryptocurrency. Twenty One, whose launch was announced Wednesday, joins a growing list of companies embracing the so-called bitcoin treasury strategy popularized by Michael Saylor's MicroStrategy. Such companies put bitcoin on their balance sheets -- and sometimes issue debt to buy more -- in anticipation that bitcoin will continue to rally.

Twenty One plans to launch with about $4 billion worth of bitcoin, provided by its backers: stablecoin giant Tether; its sister company Bitfinex, a crypto exchange; and SoftBank. Tether and Bitfinex will be the majority owners of Twenty One, which said it is raising $585 million to buy more bitcoin.

That echoes MicroStrategy, which has amassed more than $50 billion of bitcoin. Some crypto proponents say Twenty One could become a credible challenger to MicroStrategy given its roster of heavyweight backers.

In a show of investor enthusiasm for the concept, shares of Cantor Equity Partners -- the SPAC that Twenty One is using as a vehicle to go public -- have nearly tripled since news of the deal came out. SPACs are shell companies that exist solely to do deals with private firms aiming to go public, an alternative to standard initial public offerings.

Many Wall Street veterans warn that the business model of simply buying and holding bitcoin is risky and unsustainable. The strategy can lead to huge losses when bitcoin crashes, as it has done often throughout its history.

MicroStrategy notched a $5.91 billion loss on its digital-asset holdings for the quarter that ended in March, due to a slump in the price of bitcoin. Similarly, Tesla earlier this week reported a $125 million mark-to-market loss on its bitcoin holdings. Elon Musk's electric carmaker first disclosed that it was buying bitcoin in 2021.

Write to Alexander Osipovich at alexo@wsj.com and Vicky Ge Huang at vicky.huang@wsj.com

(END) Dow Jones Newswires

April 26, 2025 11:00 ET (15:00 GMT)

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