Coinbase hopes institutional clients will flow into the cryptocurrency space via its latest acquisition of SEC-registered investment advisor, One River Digital Asset Management (ORDAM), a subsidiary of One River Asset Management.
The acquisition marks the first for Coinbase since it closed a $275 million deal for derivatives exchange FairX in February 2022.
It adds to Coinbase’s service offerings for institutions which include trading, staking and prime brokerage, and makes sense in the context of Coinbase’s revenue diversification plans away from retail trading, according to Owen Lau, executive director at Oppenheimer & Co.
“Adding the asset management into the institutional unit can expand the capabilities to serve pension funds, to serve endowments and even some other asset managers,” Lau told Blockworks.
ORDAM will be renamed to Coinbase Asset Management (CBAM) following the acquisition. Its current chief executive officer and chief investment officer Eric Peters will remain in his post alongside deputy CIO Marcel Kasumovich.
“I couldn’t be more thrilled with this outcome,” Peters said in a LinkedIn post.
The digital asset management company offers advisory services for institutional clients — including commercial banks and pension funds.
It first caught the attention of the public after Bloomberg reported that it joined forces with Alan Howard to become one of the largest holders of bitcoin, in December 2020.
“At the time, it was one of the largest institutional allocations to these assets in history,” Peters said. “Underlying the investment was a belief that bitcoin and ether represented highly convex expressions of a global macro investment theme that unfolded post-Covid: Monetary Debasement.”
Brevan Howard acquired a 25% stake in the parent hedge fund firm the next year.
Coinbase was soon selected to become a full-service partner and custodian for One River and the two companies worked closely together to invest in an undisclosed amount of digital assets.
The exchange said in a Feb. 21 shareholder letter that around 20 of the top 100 hedge funds in the world by reported assets under management (AUM) have been onboarded since the end of 2020.
Lau noted that the AUM of One River may not generate fees “to move the needle” itself, but he characterized the move as lying a “foundation for more revenue diversification.” For instance, Coinbase may aim to make additional acquisitions in the asset management space, or leverage One River’s network to attract more assets.
“I do feel like this is a pretty good move for Coinbase longer term,” Lau said.
Building on One River’s prior relationship with Coinbase, the firms disclosed that conversations on how to collaborate further continued in 2022, as the crypto industry was embroiled in a tumultuous period.
After recognizing both firms’ commitment to customer protection, Peters said that he “developed a strong conviction that we would more fully realize our ambitions as a pillar within Coinbase.”
Coinbase referred to the firms as culturally “strongly aligned” in its announcement, citing “an uncompromising priority on safety and soundness.”
The new unit “will continue to operate as an independent entity under Coinbase, segregated from our trading and exchange businesses,” Coinbase said.
Financial terms of the deal were not disclosed.
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Source: https://blockworks.co/news/coinbase-one-river-acquisition