On February 26, fintech startup Circle announced it closed a deal to buyout the cryptocurrency exchange Poloniex for reportedly $400 million, the largest acquisition in crypto history. The acquisition is intriguing because it may reveal information about the trajectory of Circle, and the sentiment of Circle's venture capital backers.

Circle was founded in 2013 as a peer-to-peer payments company. The Boston-based firm raised over $140 million in venture capital from funding rounds led by Goldman Sachs (GS  ). Its initial investors include China's IDG Capital, Jim Breyer, General Catalyst, Accel Partners, and Baidu (BIDU  ). Circle's original goal was to make sending money as easy as sending a text.

The acquisition is not Circle's first foray into crypto. Circle was founded as a unique fusion of payment startup Zelle and exchange Coinbase/GDAX. Its app allows users to transfer money linked from their debit cards and bank accounts to other users instantly. Until December 2016, Circle also operated a one-click Bitcoin (BTC) exchange, allowing users to buy, sell, deposit, and withdraw with ease. Its exchange was free of transaction fees, compensated by a larger spread, allowed credit card purchases, and introduced many people to crypto. But Circle shut down its exchange to focus on competing with money transmitters like Zelle and Venmo, as well as an experimental remittance platform to serve the unbanked. It also launched Circle Trade, an over-the-counter trading service for institutions, making Circle a large market maker for ultra-high net-worth investors.

It seems that Circle regretted exiting the retail trading sector, saw the record growth by peer exchanges like Coinbase/GDAX, Gemini, and Kraken in 2017, and wanted a piece of the profits, as well as an escape from the cutthroat competition with big bank-backed Zelle and Venmo. Instead of reviving their web platform, they figured buying an established exchange would be more worthwhile. Circle has stated that it will keep Poloniex's existing trading pairs and add EUR and GBP pairings.

Poloniex is one of the world's premier crypto exchanges. The Boston-based exchange traded $140 million in volume yesterday. But it has mixed reviews on customer service and major issues with transfers and support tickets. Poloniex is struggling to address the massive influx of new customers in the last year. Circle has expertise in compliance with know-your-customer (KYC) and anti-money-laundering (AML) regulations, and can help Poloniex efficiently process new customer registrations and improve customer support. Since an internal memo stated that the Security and Exchange Commission (SEC) gave Circle its blessing for the acquisition, Poloniex it will provide a safer, regulated experience for new crypto investors.

Altcoin owners should celebrate the Wall Street-backed acquisition. Circle CEO Jeremy Allaire told CoinDesk: "Pulling this all together, pulling this under one roof, allows us to realize those broader ideas for consumer products." That means Circle wants a one-stop solution for its customers. Because Poloniex offers trading in obscure altcoins like Dogecoin (DOGE), Augur (REP), Golem (GNT), among others, the post-acquisition influx of consumer demand will help prices rise.

One thing to note is that Circle is in the midst of launching its own trading platform. Circle Invest, slated to be released later this year, will offer retail investors commission-free trading, custodial accounts, and secure storage. Perhaps Circle's Poloniex acquisition is only part of its grand plan to regain dominance in the crypto space.

The author holds a long position in BTC.