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Nexon, a $10 billion USD conglomerate headquartered in Japan, is one of the most influential companies in the global gaming industry – with its parent organization NXC based in Jeju Island, South Korea. Last year, NXC acquired a majority stake in Korbit, the country’s 2nd largest cryptocurrency exchange at a $150 million valuation. This year, Nexon is planning to acquire Bitstamp, according to Business Insider.
Bitstamp is the cryptocurrency industry’s oldest Bitcoin exchange that has provided trading services to users since 2011. With capital raised from cryptocurrency-focused investment firm Pantera Capital in 2013, Bitstamp has continued to operate as a leading exchange in the cryptocurrency sector.
However, as the market started to evolve and grow at an exponential rate, Bitstamp fell out of favor amongst cryptocurrency investors, primarily because trading has shifted from fiat-to- cryptocurrency trading to cryptocurrency-only trading. At the time of writing, Bitstamp remains as the 13th largest exchange in the world, behind major cryptocurrency trading platforms like Bitfinex, Bithumb, Upbit, Binance, and Huobi.
Nexon’s acquisition
The potential acquisition of BItstamp by Nexon is particularly captivating because according to the sources of Business Insider, this deal is being directly led by the Nexon team and not its parent company NXC.
In September 2017, NXC paid $80 million to acquire a 70 percent stake in Korbit. At the time, local analysts suggested that the acquisition signified the intent of the South Korean conglomerate to branch out to the cryptocurrency market after having seen success in the gaming industry for more than two decades.
The acquisition of Bitstamp at a $350 million valuation is said to be conducted directly by Nexon – the subsidiary company of NXC – which would lead to the direct involvement of Nexon in the management and operation of Bitstamp.
Both Nexon and Bitstamp representatives declined to provide any additional information on the matter and requested investors to seek out for official statements that may be released by the two companies in the future. Business Insider’s sources said that the deal is still formative and could fail to solidify.
Significance of the deal
If the acquisition of Bitstamp by Nexon goes through, the deal could potentially lead to the gaming giant expanding the Luxembourg-based exchange to South Korea, leveraging its connections with local banks and financial institutions.
Previously, even some of the biggest exchanges in the cryptocurrency industry including Binance, the largest cryptocurrency trading platform as of current, turned down several investment deals to partner with venture capital firms that could provide assistance in securing deals with governments and financial service providers.
During an interview with Bloomberg, Binance CEO Changpeng Zhao said that the company is not in need of external capital and additional funds but are in search for investors and venture capitals that can help the exchange to secure operating licenses with governments.
Due to the rapidly growing demand for cryptocurrencies digital currency exchanges are in an ideal position financially. Exchanges are raking in more profits than major banks, as seen in the case of Binance and Coincheck, prior to its hack. Binance generated more than $200 million in quarterly profits this year, which is a higher profit margin that Germany’s biggest bank Deutsche Bank.
Nexon, with the backing of South Korea’s major investors and corporations, could easily launch a cryptocurrency exchange and aggressively expand it throughout the country. The intent of the company to acquire an exchange with a strong reputation and a long history demonstrates the firm’s cautious approach in entering the cryptocurrency sector, to ensure the exchange is compliant in terms of regulations and security measures.
Premiums are back
Cryptocurrency premiums in South Korea have returned in April, after a month of trading in March with lower rates than the global trading prices of cryptocurrencies like bitcoin and Ethereum.
Throughout the past year, cryptocurrency investors in South Korea traded both major cryptocurrencies and tokens with a premium in the range of 5 to 30 percent, due to the lack of supply in the South Korean market. In December 2017, when the bitcoin price surpassed $20,000 in the global cryptocurrency exchange market, in South Korea, bitcoin was being traded at over $25,000.
Premiums have returned in South Korea at last and bitcoin is being traded at over $9,600 on Bithumb, while the dominant cryptocurrency is being traded $9,400 globally.
Current premiums in the South Korean market are not as significant as before, but it is important to acknowledge the reappearance of the premiums because it demonstrates the increase in demand for cryptocurrencies and the entire market.
In October 2017, during an interview with Nathaniel Poppers from the New York Times, Korbit founder and CEO Tony Lyu said that the South Korea market tends to move strongly through word of mouth.
“Word just spreads really fast in Korea. Once people are invested, they want everyone else to join the party. There’s been this huge, almost a community movement around this,” said Lyu.
Local investors often describe the South Korean financial market as a copper pan, as it heats up and cools down extremely fast. The local cryptocurrency exchange market moves similarly and when investors begin to invest in the market again, it will likely heat up and the demand will increase at an exponential rate.
Competition
Last week, South Korea’s deputy minister of strategy and finance said that the cryptocurrency market is growing rapidly and that he would like to see some competition within the space.
This year, two of the biggest cryptocurrency exchanges in the market Huobi Pro and OKEx expanded into South Korea. Upbit and Bithumb have evolved into two of the largest exchanges in the world as well, competing against the likes of Binance, OKEx, Huobi Pro, and Bitfinex.
If Nexon successfully acquires Bitstamp and enters the cryptocurrency market, it will create more competition within the local market – therefore increasing the stability and liquidity of the global cryptocurrency market.