Coinbase Eyes $4B-$5B Deribit Acquisition to Expand Derivatives Market

Coinbase Global Inc. is in advanced discussions to acquire Deribit, the world's largest trading platform for Bitcoin and Ether options. This potential acquisition, valued between $4 billion and $5 billion, represents a significant move by Coinbase to expand its presence in the derivatives market. Deribit, licensed in Dubai, has processed nearly $1.2 trillion in volume last year, indicating a high demand for advanced trading products.

Coinbase, a publicly listed company, operates the largest crypto exchange in America, selling hundreds of thousands of digital tokens and offering an Ethereum-based wallet to allow clients to safeguard their tokens while accessing popular exchanges. The company has expanded rapidly, with various departments operating within the organization. Coinbase announced that 1,000 American jobs would be created at the White House summit.

Deribit’s founders, John Jansen and Marius Jansen, created the exchange in 2016. Initially based in the Netherlands, it attracted many early crypto investors. In January this year, a spokesperson for Deribit said the company was still not for sale but was in talks with various investors at the time. Deribit did not name the investors who were interested in the company.

As the U.S. embraces the crypto business under the new administration, American exchanges may see this as a rare opportunity to expand their operations. The changes may benefit companies like Coinbase and Kraken.

Coinbase’s decision to buy Deribit could be part of a strategy to enter the Middle East market since Deribit is based in Dubai. Innovation hubs have emerged from adopting crypto, including the United Arab Emirates, and Singapore. Conversely, during the ‘war on crypto’, American and European innovation suffered and became less noticeable despite these regions showing a strong market for crypto amongst the general population.

The acquisition of Deribit would mark Coinbase’s most aggressive push yet into derivatives, a segment of the market that has become increasingly lucrative. This move comes as Coinbase seeks to intensify its rivalry with competitors such as Robinhood and Kraken. Robinhood, which acquired Bitstamp for $200 million last June, has plans to roll out staking, stablecoins, and more tokens, positioning itself to enter the international derivatives and staking arena. Bitstamp lists about 100 tokens and has deep ties to institutional players, which could further enhance Robinhood's competitive edge.

Meanwhile, Kraken has taken a different approach by acquiring traditional futures broker NinjaTrader in a $1.5 billion deal. This purchase gives Kraken a CFTC-registered license, opening the door to offering crypto futures in the US. Coinbase, on the other hand, has long dominated the US spot markets and is benefiting from surging trading volumes and favorable pro-crypto US policies. Analysts have noted that Coinbase remains the dominant platform to ride these tailwinds, with perpetual futures and other new trading products potentially gaining US approval in the near future.

The acquisition of Deribit would not only bolster Coinbase’s derivatives offerings but also provide it with a significant competitive advantage in the global market. Deribit’s extensive experience and high trading volumes make it an attractive target for Coinbase, which aims to leverage this acquisition to further solidify its position as a leading player in the cryptocurrency industry.