Crypto companies kept buying each other last year even as both M&A and funding deal flow in the industry took a dive, according to a report released Monday by PwC.

On the M&A side, crypto-native acquirers took 56 percent of the deal flow, compared to 42 percent in 2018. The total number of M&A deals flagged by the report dropped from 189 in 2018 to 114 last year, while the value of M&A deals dropped by a whopping 76 percent from $1.9 billion to $451 million.

Larger companies were able to eat up ones that provided services that were ancillary to their own, PwC Global Crypto Lead Henri Arslanian told CoinDesk in an interview.

“I think we should expect some of the big players to get bigger, but not by buying direct competitors,” Arslanian said. “Not by becoming vertically bigger but by becoming horizontally bigger. Unicorns are becoming more like octopuses where they have their hands in various areas of the crypto ecosystem.”

Meanwhile, the declines on the fundraising side of the report weren’t quite as stark. Post-seed rounds took up eight percentage points more of overall fundraising deals in 2019, a sign of the sector’s maturation.

“I think that’s something we should expect to see as well, as the industry matures, there will be enough deal flow and there will be enough exits as well to allow many of the crypto VCs to be successful,” he said.

Fundraising overall decreased by 40 percent to $2.24 billion and the number of deals dropped by 122. Equity fundraising decreased by less, showing only an 18 percent drop. The rise of bitcoin in the second and third quarter of 2019 didn’t stave off the funding drop, and the industry should assume going into 2020 that the global economic downturn will further affect funding deals, the report said.

Takeaways from the second edition of PwC's Global Crypto M&A and Fundraising Report. Source: PwC

Last year did see a doubling of corporate venture capital involvement, taking up 6 percent of the deals. As clear regulatory frameworks in Europe and Asia begin to develop, more institutional players are taking notice. Family offices with long-term investment strategies that Arslanian advises continue to show more interest in crypto over time, he said.

The type of companies receiving investment also changed year-to-year. In 2018, most VC funding went to blockchain infrastructure projects while crypto compliance and regulatory companies saw the most investment in 2019.

Deal flow is also moving away from the Americas and towards Asia and Europe, which increased their deal share by eight and six percentage points, respectively. Last year was the first year most of the crypto fundraising and M&A deals happened outside of the U.S.

Companies looking for new institutional clients are flocking to Hong Kong while firms looking for a retail audience are considering Singapore’s new regulatory framework, Arslanian added.

“We’ve definitely seen a number of the large players from the U.S. and from Europe really look at Asia not only from an expansion perspective but also as a point of fundraising from strategic investors,” he said.