Tonight, Coinbase was supposed to announce its Q1 2025 financial report, but the market was first greeted with news of its acquisition of the largest crypto options platform, Deribit.
On May 8, Coinbase, a leading cryptocurrency trading platform in the U.S., officially announced its acquisition of the leading cryptocurrency options trading platform Deribit. This acquisition aims to integrate spot, futures, and options trading businesses to build a more comprehensive cryptocurrency asset trading ecosystem. According to the official announcement, the total price of this acquisition is approximately $2.9 billion, including $700 million in cash and 11 million shares of Coinbase Class A common stock. The final transaction price will be adjusted according to customary practices and is expected to be completed by the end of this year.
Coinbase emphasized in its statement that through this acquisition of Deribit, the company will leap to become a leader in the global crypto derivatives market based on open interest and options trading volume. Deribit currently has approximately $30 billion in open interest and over $1 trillion in trading volume. Its addition will significantly enhance Coinbase's leadership position in the global crypto market and improve its product layout in the derivatives field, forming a strong complement to Coinbase's futures business in the U.S. and its international perpetual contract business.
Coinbase stated that this acquisition is a crucial step in achieving its vision of a one-stop platform that integrates spot, futures, perpetual contracts, and options trading, helping to enhance capital efficiency.
Once the transaction is completed, Deribit will immediately enhance Coinbase's profitability and provide more diverse and countercyclical trading revenue. Compared to spot trading, which is more affected by market fluctuations, options trading revenue is usually more stable, as traders use options for risk management in both bull and bear markets.
Why is Deribit the king of cryptocurrency options trading?
Deribit was founded in 2016 and was initially established in the Netherlands as a trading platform focused on digital currency derivatives.
As the world's first platform to launch cryptocurrency options, Deribit has currently become the most active platform for cryptocurrency options trading, holding over 80% of the market share in options. At the same time, Deribit has also ranked among the top ten global trading platforms in terms of cryptocurrency futures trading volume and open interest for a long time.
Its platform offers various margin trading options, including BTC, ETH, USDT, and USDC, covering spot trading, coin-based and U-based perpetual contracts, futures contracts, and options contracts. It is worth mentioning that Deribit provides a wide range of futures and options contracts, including futures with different durations and the most comprehensive options for dates, weeks, months, and quarters in the entire market.
In January 2023, Deribit moved its headquarters to Dubai and subsequently obtained a full market product license under the Dubai Virtual Assets Regulatory Authority (VARA). In addition, Deribit implemented the FATF's 'travel rule' to strengthen anti-money laundering measures and launched advanced custody solutions in partnership with Fidelity, Zodia, and Copper.
In fact, as early as January of this year, Bloomberg cited insider information that Deribit had a willingness to be acquired. Deribit also invited Financial Technology Partners LLC (FT Partners) to participate in evaluating potential buyers and stated that Deribit's valuation could exceed $5 billion. Both Kraken and Coinbase expressed interest in exploring the opportunity.
On March 22, according to Bloomberg, Coinbase was in deep negotiations to acquire the derivatives crypto trading platform Deribit. Some insiders have stated that both parties have informed the Dubai regulatory authorities about the negotiations, as Deribit holds the relevant licenses in Dubai.
Coinbase's acquisition plans
For Coinbase, acquiring Deribit will bring multiple strategic benefits. First, once the transaction is completed, Deribit is expected to immediately enhance Coinbase's profitability and bring more diverse and countercyclical trading revenue.
On the eve of the quarterly financial report, Wall Street analysts expect Coinbase's performance to fall short of expectations, as weak retail trading may impact the platform's most profitable business segment.
According to FactSet data, the company is scheduled to release its quarterly report after the market closes on Thursday. Analysts predict that its earnings per share (EPS) will drop from $2.26 in the fourth quarter of last year to $1.93, with revenue declining from $2.27 billion to $2.1 billion. This is a significant decline compared to the EPS of $4.40 and revenue of $1.2 billion in the same period last year. The trading volume for the quarter is expected to reach $403.8 billion, down from $439.0 billion in the fourth quarter of last year.
Therefore, announcing the acquisition news at this time may also be a relevant consideration. Compared to spot trading, which is more susceptible to market fluctuations, options trading revenue is usually more stable, as traders utilize options for risk management in both bull and bear markets.
Secondly, this acquisition is another important move for Coinbase in terms of strategic mergers and acquisitions. Previously, it successfully acquired Xapo, facilitating the launch of Coinbase Custody, acquired Tagomi to enable the launch of Coinbase Prime, acquired FairX to lay the foundation for Coinbase Derivatives Exchange, and acquired One River Digital to build Coinbase's asset management business.
How does the market view this historic acquisition?
The community generally holds a positive attitude towards this acquisition. Raoul Pal, co-founder of Real Vision, believes that Coinbase's acquisition of Deribit is not only an important opportunity for itself but also significantly reduces a potential systemic risk, as the options market was previously dominated by a smaller trading platform. In the event of a black swan event, high leverage could lead to serious issues. Overall, Pal sees this as good news beneficial to all parties.
Market analysis also notes that with Deribit's trading volume projected to reach $1.2 trillion in 2024, assuming an average transaction fee of 0.035%, its annual revenue would be approximately $420 million. Coinbase's acquisition for $2.9 billion amounts to acquiring this market share at around 6.9 times the sales ratio, which appears more cost-effective compared to Robinhood's sales ratio of up to 15 times.
Further analysis points out that for Coinbase, which is headquartered in the U.S., its involvement in derivatives business such as options and futures has been limited due to regulatory constraints. However, the regulatory landscape in the U.S. seems to be changing, making the acquisition of Deribit a strategic opportunity to pave the way for Coinbase to launch a more comprehensive derivatives trading offering in the U.S. market.
Some voices in the community also point out that Deribit, as a profitable and steadily growing leading platform, easily complements Coinbase's global compliance layout, high-net-worth customer system, and USDC settlement system. In the future, it is even expected to directly offer high-quality options trading to institutions and U.S. users through Coinbase Prime, further expanding its market share.
As derivatives increasingly become the core revenue source for trading platforms, Coinbase's acquisition of Deribit undoubtedly will reshape the crypto derivatives market landscape and lay a solid foundation for itself in the upcoming new bull market. Whether it can successfully bring its derivatives business into the U.S. market remains to be seen as regulatory clarity unfolds.