Coinbase’s Daring Dance with Deribit: A Match Made in Crypto Heaven?

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In a most thrilling turn of events, Coinbase finds itself in what can only be described as advanced negotiations to acquire Deribit, that illustrious cryptocurrency derivatives exchange, as reported by the ever-reliable Bloomberg on this fine day, March 21. One can only imagine the clinking of champagne glasses in the boardrooms as they toast to this potential union.

Should this acquisition come to fruition — and let us not forget, it is the world’s largest venue for trading Bitcoin (BTC) and Ether (ETH) options — it would undoubtedly enhance Coinbase’s rather modest derivatives platform, which, at present, seems to be fixated on futures like a dog with a bone.

In a display of regulatory decorum, both Coinbase and Deribit have dutifully informed the regulators in Dubai of their tête-à-tête. After all, Deribit possesses a license in Dubai, which, if the stars align, would need to be transferred to Coinbase. One can only hope the paperwork is in order, lest we find ourselves in a bureaucratic quagmire.

Bloomberg, in its infinite wisdom, has suggested that a deal with Coinbase could value Deribit at a staggering $4 billion to $5 billion. Yes, you read that correctly — billion with a ‘b’. It seems the crypto world is not short on extravagant valuations, much like a lavish dinner party where the host insists on serving caviar on toast.

Deribit, in its infinite generosity, lists options, futures, and spot cryptocurrencies, boasting a total trading volume last year of around $1.2 trillion. That’s trillion with a ‘t’, for those keeping score at home. Meanwhile, on March 20, Kraken, a rival crypto exchange, announced its own plans to acquire the derivatives trading platform NinjaTrader for a mere $1.5 billion. Ah, the competition is fierce, and the stakes are high!

Red-hot market

Cryptocurrency derivatives, those delightful concoctions known as futures and options, are experiencing a veritable renaissance in the US. It appears that everyone wants a piece of the action, much like a buffet where the most popular dishes vanish in seconds.

Futures, those standardized contracts, allow traders to buy or sell assets at a future date, often with leverage — a bit like betting on a horse that hasn’t even left the starting gate. Options, on the other hand, grant the right to buy or sell — “call” or “put,” as the traders so charmingly put it — an underlying asset at a predetermined price. It’s all very sophisticated, isn’t it?

Both types of financial derivatives have become the darlings of both retail and institutional investors, who use them for hedging and speculation. In December, Coinbase triumphantly announced that derivatives trading volumes had soared by a staggering 10,950% in 2024. Yes, you heard that right — a number so large it could make one’s head spin.

Coinbase, in its quest for dominance, lists derivatives tied to a staggering 92 different assets on its international exchange, with a smaller selection available in the US, according to its 2024 annual report. It’s a veritable cornucopia of options!

In January, Robinhood, that plucky online brokerage, rolled out cryptocurrency futures, redoubling its efforts to compete with Coinbase. It’s a classic case of “keeping up with the Joneses,” but in the world of crypto.

In February, the CME Group, the world’s largest derivatives exchange, announced it had clocked an average daily trading volume of approximately $10 billion for crypto derivatives in the fourth quarter of 2024 — a more than 300% increase from the year prior. One can only imagine the celebrations in the boardroom!

Coinbase, not to be outdone, launched the US’ first Commodity Futures Trading Commission-regulated Solana (SOL) futures in February, with the CME following suit the very next month. It’s a race to the finish line, and everyone wants to be the first to cross!

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2025-03-21 22:32