Coinbase Global Inc., still reeling from a plunge in trading volume on its exchanges, is expanding into a less-volatile corner of the cryptocurrency ecosystem with the purchase of One River Digital Asset Management
Unlike most of the prominent names in crypto, One River Digital, founded by macro trader Eric Peters as a unit of his hedge fund, has built a business to serve only the needs of institutional clients such as pension funds, avoiding retail customers altogether. That focus on long-term capital and money management over trading has left it less exposed to the kinds of wild swings in token prices and crypto exchange activity that others, including its new owner, are wrestling with now.
“This is about wanting to bring more institutional capital into the world of crypto,” Greg Tusar, Coinbase’s head of institutional product, said in an interview. “We expect to build — on the other side of this crypto winter — an awesome asset-management business.”
Tusar declined to disclose any terms of the acquisition.
One River Digital in 2020 as one of the then-largest holders of Bitcoin. Alan Howard, the co-founder of Brevan Howard Asset Management, was an early backer, and a financing round in 2021 added Coinbase, Goldman Sachs Group Inc.Liberty Mutual Group Inc. as investors. That deal valued One River Digital at $186 million.
Read More: Goldman, Coinbase Back Crypto Fund Manager One River Digital
The firm is being renamed Coinbase Asset Management with Peters serving as its chief executive officer and chief investment officer. Its deputy CIO Marcel Kasumovich, a veteran of Goldman, Merrill LynchSoros Fund Management, will continue in his role as well.
In one quirky aspect of the acquisition, Peters will continue as CEO and CIO of his Stamford, Connecticut-based hedge fund, One River Asset Management, which remains a separate firm.
“Having a dual role gives me insight into the worlds of digital and traditional assets,” Peters, 56, said. “I’m betting on convergence between the two over the next decade.”
In a note to clients, Peters detailed the relationship he formed with Coinbase, starting with One River Asset Management’s first Bitcoin and Ether purchases in November 2020. By the end of 2021, he had mostly cashed out, generating more than $1 billion in profits for his clients and neatly sidestepping the crypto carnage that soon followed, including the collapse of the TerraUSD stablecoin and failures of Voyageur Digital Ltd., Celsius Network and FTX.
As Peters evaluated the options for One River Digital, he concluded that building out asset management at one of the dominant players in the industry was simply too attractive to pass up.
“Did I want to compete with these guys or be in business together with them?” Peters said. “It was a pretty easy decision for me.”
The negotiations began about a year ago and dragged on through the crypto wipeout that erased almost $1.5 trillion in token values in 2022.
After bidding up Bitcoin to almost $69,000 in November 2021, investors and speculators alike deserted crypto as one scandal after another drained confidence in digital assets. At San Francisco-based Coinbase, revenue and trading volume both plummeted in 2022, and the company reported a full-year loss of $2.63 billion.
Read More: Coinbase Posts $557 Million Quarterly Loss as Revenue Slumps 75%
Coinbase, the largest US crypto exchange, already has several businesses dedicated to institutions, among them crypto custody, trading, staking and prime services, as well as a spot market for tokens and a derivatives exchange. Some of those businesses are coming under increased regulatory scrutiny. Coinbase Asset Management will be a separate division with appropriate controls and barriers to ensure client confidence and regulatory compliance, Tusar said.
One of Peters’s early accomplishments at One River Digital was recruiting Jay Clayton, former US Securities and Exchange Commission chairman, as an adviser. It was Clayton who led the SEC crackdown that effectively killed the market for initial coin offerings, or ICOs.
Clayton, who’s staying on through the sale together with other members of One River Digital’s advisory board, predicted there will be more consolidation as crypto matures.
“We’re going to see a lot more strategic combinations,” Clayton said in an interview. “Traditional financial players are starting to think about acquisitions of distributed LEDGER or blockchain companies, especially those that don’t have any legacy regulatory risk.”