Coinbase’s Interest in FTX Europe and Derivatives Market Expansion
Cryptocurrency exchange Coinbase had shown interest in acquiring FTX’s European entity, signaling its plans to expand its derivatives business globally. Derivatives, which derive their value from underlying assets like Bitcoin or Ether, have gained popularity compared to spot trading. In fact, Q2 2023 saw derivatives volume six times larger than spot volume. FTX Europe was the only entity offering perpetual futures until FTX’s collapse. With a valuable license that could only be transferred through acquisition, FTX Europe attracted multiple buyers.
Coinbase’s Previous Acquisitions in the Derivatives Space
Due to regulatory limitations in the US, Coinbase has been working on launching an offshore derivatives exchange focused on Asian markets. The exchange is also advocating for clarity in the US crypto market. In the past, Coinbase acquired futures exchange FairX as part of its strategic business expansion. Other parties interested in acquiring FTX Europe include Crypto.com and FTX FDM.
FTX Europe’s Role in Bankruptcy Proceedings
FTX Europe has become a focal point in FTX’s bankruptcy proceedings. Originally founded as Digital Assets DA AG, it was acquired by FTX to expand derivatives offerings across Europe and prevent rivals from using DAAG’s tokenized stock service. However, FTX debtors filed a lawsuit seeking to recover millions of dollars from FTX Europe and its executives, arguing that the acquisition was a disastrous decision.
The Feasibility of an Acquisition
While there is considerable interest from Coinbase and other entities in acquiring FTX Europe, debtors have stated that an acquisition is not feasible according to professional advisors. However, the bankruptcy estate continues to entertain offers for the entity, with the deadline for potential sale extended. The process of evaluating viable options for the sale of FTX Europe remains ongoing.
Hot Take: Coinbase’s Interest in FTX Europe Signals Derivatives Market Expansion
Coinbase’s pursuit of acquiring FTX Europe demonstrates its ambitions to expand into the derivatives market globally. With derivatives growing in popularity and volume surpassing spot trading, Coinbase recognizes the potential in this sector. While their interest in FTX Europe did not materialize, it highlights Coinbase’s strategic approach to business expansion and its commitment to exploring opportunities in the derivatives space. As regulatory limitations persist in the US, Coinbase is actively working on offshore derivatives exchanges and advocating for clarity in the domestic crypto market. Despite challenges, Coinbase remains focused on maximizing its presence and value in the derivatives industry.
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