Crypto's Largest Acquisition In History

Transcript

All right, let's talk about the bigger news of the week. Uh, Coinbase is acquiring Darabbit. It's the largest deal in crypto history. So, uh, this, um, I think folks have known for a while that, uh, Darabbit has been in market. Um, I it's been rumored that some other crypto exchanges were looking at them. Uh, for context, Darabbit controls roughly 80% of the, uh, crypto derivatives. Uh, cryp and uh, the options market in um, so Darabit is a derivatives venue. They control roughly 80% of the market. Um, I think back in March, Bloomberg leaked that they were selling. Uh, they've been selling for quite a while before that, I think. Um, pretty relatively small team. They've done an amazing job.

Uh, this is a really interesting deal. So, I I heard that I heard that Tencent was looking at the deal. I heard that some of the other big crypto exchanges were looking at it. Um, but yeah, it's a $2.9 billion deal. 700 million in cash. Uh, and then another 11 million 11 million in shares. Coinbase stock is at 200 bucks. That's 2.2 billion. So 2.22 billion of stock, 700 million of cash. Um, so the la the last numbers that I saw from Darabit from a fundraising deck was from 2023 where they were doing roughly like 85 million in profit and 120 million in in revenue. Um, so really like really high margin company.

But the thing the the the thing that's happening here is the exchange there's a broader trend of M&A right now happening in crypto. The exchanges are the big buyers in crypto right now and they want two they want two things. They want funded accounts and they want the ability to offer more products to their um to their traders. So, PERPS, options, um I think the next wave of acquisitions that you'll see uh crypto exchanges make will be in the tokenization and RWA space. So, the ability to offer, you know, maybe Coinbase can offer tokenized stocks, uh credit funds on chain, thing like things like that. So, really really interesting acquisition. The the

industry needs M&A to thrive. You need the venture investors to do well from their private from their equity investments. You need the companies to be able to go public. You need companies to be able to sell. So, this is a really healthy dynamic and I don't know, I love to see it. I think it's great. Yeah, absolutely. I mean, the what's interesting, too, is uh Coinbase is up on the announcement um you know, 6% the entire market's rallying, but um we'll see after earnings uh what the commentary is. Uh if I believe they report after close today, right? Um Coinbase does. So, that that's going to be interesting. um what the commentary is from the team uh Brian and the team.

So yeah, that should be really interesting. Look at this. So we we uh actually Block Works Research just launched uh M&A and fundraising data on the platform. Look at this. So it only goes back to it goes back to Q2 of 2018. This is this big green chart bar right here on the right. This is Q1. So here, wait, let me actually Ripple. Yeah, this is this one is um Ninja Tra the Kraken Ninja deal. This is Ripple Hidden Road, right? Or or vice versa. Um but yeah, I mean look at this.

Look at this M&A data by sector just growing. This doesn't even include the Darabit Coinbase deal. Well, this will be, you know, up added overnight. So, wow. Yeah. Yeah. So I guess zooming out from this deal, I mean I the thing that maybe a lot some folks are not privy to that's just really interesting is I've never seen so many crypto companies in market right now. Yeah. Every especially the kind of class of 2017 um a lot of the custodians a lot of the data companies a lot of the staking folks like you know these are like the founders have been building for seven eight years. A lot of the companies are doing somewhere between like five to 30

million in revenue and a lot of them are selling. Why why would Derbit sell? Um because they've Why would do they want like access to the distribution that Coinbase has built? Seems like look they command most of the market share. is your point saying like they they have so much market share that it can only go down from here and if it goes down from here it starts like they've sold at the right time and and and it's a um I mean it's a slightly messy cap table but it's a heavily founderowned company so I think this might just be the founders saying look we've been building for like a decade in crypto um it's a multi-billion dollar acquisition and you know this is gener generational wealth for the

founders I would guess also maybe if you take out if you take that out of out of the picture probably um you know that you argue the space is getting much more regulated and is moving more onshore. Darab is more of like an offshore venue. Um yeah. Yeah. I think uh I was on another podcast earlier today and you got to think like I think and you let me know if this makes sense. There's a lot of signaling in Coinbase buying this because they feel that they can integrate Derbit into their core offering which they've been missing for a while. like what's made Coinbase um product offering is really lacked is is this right options and per and you know and so offering this uh I mean it's it's probably really interesting from their standpoint

justifying the acquisition like and how they think about layering it in it probably tells you everything you need to know about the how the reg how they believe the regulatory environment is going to unfold particularly in the US you also see I think it was last week you you've seen a lot of the offshore exchanges now start to build a presence in the US which is really encouraging. Uh I think it I think it was like OKX that is now launching an office in in California I think in San Monteo near SF. Um, so yeah, all all this to say is like really really encouraging developments on the regulatory like so I moderated this thing with um with the head with the head of Coinbase's derivatives business in in Dubai and they are I mean it is an allout push for

them with per like I think Robin Hood and Coinbase are I mean they're they're rolling out per der like derivatives options it's all it's all coming to the US so [Music]