Cryptocurrency exchange Coinbase has made two attempts to acquire FTX Europe since the latter filed for bankruptcy in November 2022, with the aim of expanding its derivatives business overseas. However, the company has decided not to proceed with this deal.
According to reports from Fortune, Coinbase has twice considered purchasing the European branch of FTX, once in November 2022—following the serious collapse of the parent company—and again in September 2023. A spokesperson for Coinbase confirmed the reports, saying, “We continuously evaluate opportunities to strategically expand our business and meet with various groups worldwide.”
Besides Coinbase, other parties interested in FTX Europe are believed to include the Crypto.com exchange and the cryptocurrency company Trek Labs. According to Fortune, the sale deadline has been extended to September 24th. FTX spent nearly $400 million to buy back its European branch.
FTX Europe operates its derivatives business under a regulatory license from Cyprus. At the time of the parent company’s collapse, it was the only company offering several popular derivative products, such as perpetual futures contracts. Derivatives are financial instruments with values derived from underlying assets, such as Bitcoin. There are various types of derivatives, including options, futures contracts, and swaps. Investors use derivatives for risk management, leverage, and speculation in the market. It is a common investment strategy for traders and institutional investors.
The potential acquisition could boost Coinbase’s fee revenue, as cryptocurrency derivatives trading is on the rise, despite the bearish market. According to Coinbase’s latest quarterly earnings report, the exchange generated $707 million in revenue in Q2 2023, with $327 million coming from spot trading—a 13% decrease from the previous quarter.
Meanwhile, global derivatives trading volumes on centralized exchanges increased by 13.7% in June, reaching $2.13 trillion USD, according to CCData. Binance was the leading cryptocurrency derivatives exchange during the month, with a trading volume of $1.21 trillion USD in June, followed by the OKX exchange with $416 billion USD, marking a 44.9% increase in activity. Bitcoin futures contract volumes also surged on the CME exchange, reaching $37.9 billion USD, a 28.6% increase for the month.
Coinbase has also entered the derivatives market in the United States. In August, they received regulatory approval to offer investments in cryptocurrency futures contracts to eligible domestic customers.
The approval allows Coinbase to introduce Bitcoin and ether futures contracts through the FairX futures exchange, regulated by the Commodity Futures Trading Commission. According to Coinbase’s announcement at the time, the global cryptocurrency derivatives market accounts for nearly 75% of cryptocurrency trading volumes worldwide and is a “key entry point for traders.”