Tonight, Coinbase was originally scheduled to release its Q1 2025 financial report, but the market was surprised by the news of its acquisition of the largest crypto options platform, Deribit.

On May 8, the leading U.S. cryptocurrency exchange Coinbase officially announced its acquisition of the top 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 acquisition price is approximately $2.9 billion, which includes $700 million in cash and 11 million shares of Coinbase Class A common stock. The final transaction price will be subject to customary adjustments and is expected to be completed by the end of this year.

In its statement, Coinbase emphasized that through this acquisition of Deribit, the company will leap to become a global leader in the crypto derivatives space based on open interest and options trading volume. Deribit currently holds around $30 billion in open interest and over $1 trillion in trading volume. Its inclusion will significantly strengthen Coinbase's leadership position in the global crypto market and enhance its product layout in the derivatives field, complementing Coinbase's futures business in the U.S. and international perpetual contract business.

Coinbase stated that this acquisition is a key step in realizing its vision of a one-stop platform integrating spot, futures, perpetual contracts, and options trading, helping to improve capital efficiency.

After the completion of the transaction, Deribit will immediately enhance Coinbase's profitability and bring in more diversified and countercyclical trading revenue. Compared to spot trading, which is more affected by market volatility, options trading revenue is usually more stable because traders use options for risk management in both bull and bear markets.

Why Deribit, the King of Crypto Options Trading?

Established in 2016, Deribit was initially founded in the Netherlands and is a trading platform focused on cryptocurrency derivatives.

As the world's first platform to offer digital currency options, Deribit has become the most active global crypto options trading platform, holding over 80% of the options market share. Meanwhile, Deribit has also consistently ranked in the top ten globally in terms of cryptocurrency futures trading volume and open interest.

Its platform offers various margin trading, including BTC, ETH, USDT, and USDC, covering spot trading, coin-margined and USD-margined perpetual contracts, futures contracts, and options contracts. It is worth mentioning that Deribit provides a wide range of futures and options contracts with different maturities, including futures of various periods and the market's most comprehensive daily, weekly, monthly, and quarterly options.

In January 2023, Deribit will relocate its headquarters to Dubai and subsequently obtained a Full Market Product license under the Dubai Virtual Asset Regulatory Authority (VARA) framework. Additionally, Deribit has implemented FATF's "Travel Rule" to strengthen anti-money laundering measures and has partnered with companies like Fidelity, Zodia, and Copper to introduce advanced custody solutions.

As early as January of this year, Bloomberg reported citing insider sources that Deribit was open to acquisition. Deribit also engaged Financial Technology Partners LLC (FT Partners) to assess potential buyers and indicated that Deribit's valuation could exceed $5 billion, with Kraken and Coinbase showing interest.

On March 22, according to Bloomberg, Coinbase was in advanced talks to acquire the derivatives cryptocurrency exchange platform Deribit. Some insiders indicated that both parties had informed Dubai regulatory authorities about the negotiations as Deribit holds relevant licenses in Dubai.

Coinbase's Acquisition Consideration

For Coinbase, acquiring Deribit would bring various strategic benefits. Firstly, upon completion of the acquisition, Deribit is expected to immediately enhance Coinbase's profitability and bring more diversified and countercyclical trading revenue.

At the time of the first-quarter earnings report, Wall Street analysts predicted that Coinbase's performance may fall short of expectations, with subdued retail trading potentially impacting the platform's most profitable business segment.

According to FactSet data, the company is scheduled to release its first-quarter report after Thursday's market close. Analysts forecast that its earnings per share (EPS) will drop from $2.26 in the previous quarter to $1.93, and revenue will decline from $2.27 billion to $21 billion. This represents a significant step back from last year's EPS of $4.40 and revenue of $12 billion during the same period. Quarterly trading volume is expected to reach $403.8 billion, a slight decrease from $439 billion in the previous quarter.

Therefore, announcing an acquisition at this juncture may also be strategic. Compared to spot trading, which is vulnerable to market fluctuations, options trading revenue is typically more stable as traders utilize options for risk management in both bull and bear markets.

Next, this acquisition is another important strategic move for Coinbase in mergers and acquisitions. Previously, it successfully acquired Xapo, driving the launch of Coinbase Custody; acquired Tagomi to facilitate the launch of Coinbase Prime; acquired FairX to establish the Coinbase Derivatives Exchange foundation; and acquired One River Digital to build its Coinbase Asset Management business.

How is the market viewing this historic acquisition?

The community generally holds a positive view of this acquisition. Real Vision co-founder Raoul Pal believes that Coinbase's acquisition of Deribit is not only a significant opportunity for Coinbase itself but also significantly reduces a potential systemic risk. Previously, the options market was dominated by a smaller exchange, and in the event of a black swan event, high leverage could lead to serious issues. Overall, Pal considers this to be good news that benefits all parties.

Market analysis also points out that based on Deribit's projected $12 trillion trading volume in 2024, assuming an average fee of 0.035%, its annual revenue would be around $420 million. Coinbase completed the acquisition at a price of $2.9 billion, equivalent to acquiring this market share at a price-to-sales ratio of about 6.9 times. Compared to Robinhood, which has a price-to-sales ratio as high as 15 times, this appears to be more cost-effective.

Further analysis suggests that for Coinbase, based in the U.S., its previous involvement in derivative businesses such as options and futures was limited due to regulatory restrictions. However, the regulatory landscape in the U.S. seems to be shifting, and acquiring Deribit at this time is a strategic opportunity for Coinbase to pave the way for a more comprehensive derivative trading offering in the U.S. market.

Some in the community also point out that as a profitable and steadily growing leading platform, Deribit is highly complementary to Coinbase's global compliance layout, high net worth customer base, and USDC settlement system. In the future, it may even be possible for Deribit to directly offer high-quality options trading to institutions and U.S. users through Coinbase Prime, further expanding its market share.

In an era where derivatives are increasingly becoming a core source of revenue for trading platforms worldwide, Coinbase's move to acquire Deribit to seize the commanding heights will undoubtedly 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 derivative business into the U.S. domestic market remains to be seen as regulation further clarifies.

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia