The aftermath of FTX’s bankruptcy in November of last year has led to intriguing developments in the industry. It has come to light that Coinbase briefly considered acquiring FTX Europe. The European unit of the failed exchange, as part of its ambitious expansion into the crypto derivatives market.
Documents reveal that while acquisition talks never advanced to a late stage. Coinbase’s interest in FTX Europe underscores the growing significance of derivatives to its global business strategy. This interest comes when spot trading volumes have dwindled amid a bear market, making derivatives more attractive for exchanges.
Crypto derivatives, which are intricate financial instruments deriving their value from underlying assets like Bitcoin and Ether, form a significant proportion of crypto trading volumes. Surprisingly, during Q2 2023, derivatives trading surpassed spot trading by a factor of six, as reported by Kaiko Research.
Regulatory restrictions on derivatives trading have further complicated the situation in the United States. As a result, major U.S.-based exchanges like Coinbase and Gemini have taken action by establishing offshore exchanges that specifically target Asian markets.
In August, Coinbase obtained approval to expand its derivatives offerings by introducing crypto futures, a derivative product aimed at U.S. customers. This move highlights Coinbase’s dedication to broadening their services. However, similar to the United States, Europe currently faces regulatory uncertainty regarding cryptocurrencies and their derivatives.
Before it went bankrupt, FTX Europe held a unique position in the European market as the sole provider of popular crypto derivatives called perpetual futures, also known as perps. This was made possible by obtaining a critical regulatory license from Cyprus. The massive cryptocurrency exchange giant initially acquired this entity for $376 million in late 2021.
FTX Europe’s Fate Hangs in the Balance
Despite facing bankruptcy, FTX Europe attracted an impressive number of users despite its parent company’s financial troubles. This success made its license a highly valuable asset, only transferrable through acquisition. Notably, Crypto.com and FTX FDM expressed keen interest in acquiring FTX Europe.
Coinbase showed interest right after FTX’s bankruptcy in November 2022 and more recently in early September 2023. However, reports indicate that Coinbase has decided not to pursue the potential deal any longer.
Coinbase has a track record of acquiring companies in the derivatives space. One notable purchase was made in January 2022 when they acquired FairX, a prominent futures exchange. A spokesperson representing Coinbase confirmed this acquisition:
We’re always evaluating opportunities to strategically expand our business and meet with many teams around the world.
The current situation surrounding FTX Europe remains intricate. The bankruptcy estate is actively striving to optimize the value of its assets despite facing legal challenges and competing offers.
The company has decided to extend the deadline for a proposed sale. This move creates new possibilities for potential acquisition opportunities. Meanwhile, the cryptocurrency community closely watches FTX Europe’s fate, as its outcome is highly anticipated due to its potential impact on U.S. and European derivatives trading.