Erik Schatzker
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
Contrary to most prominent crypto names, A digital riverbed, established by macrotrader Eric Peters as part of its hedge fund, created a company to serve only institutional clients' needs such as pension funds, completely avoid retail clients. The emphasis on managing capital and money over the long term rather than on trading has made it less exposed to wild fluctuations in token prices and crypto trading activity than other currencies, and the new owner, struggle with it now.
"It's about trying to bring more institutional capital into the crypto world," Greg Tusar, Coinbase's institutional product manager, said in an interview. "We expect to build - across this crypto winter - an impressive asset management company."
Tusar refused to disclose the conditions of the procurement.
A digital river in 2020 as one of Bitcoin's biggest owners. 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. This was a $186 million transaction.
Read the full story: Goldman, Coinbase Back Crypto Fund Manager. One River Digital
The company was renamed Coinbase Asset Management with Peters as its CEO and CIO. 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 a glimpse into the digital and traditional asset worlds," peters, 56 years old, said. "I bet the two will converge in the next ten years."
In a client note, Peters detailed his relationship with Coinbase, starting with the first Bitcoins and Aether purchases from One River Asset Management in November 2020. Between now and the end of 2021, Most of all, he cashed in, generating over a billion dollars in profits for its customers and carefully circumventing the crypto bloodshed that ensued, including TerraUSD device collapse and Voyageur Digital Ltd.'s failures, ?C Network and FTX.
Just like Peters evaluated One River Digital's options, He concluded that the implementation of asset management by one of the major players in the industry was simply too appealing to pass up.
"Was I interested in competing with these guys or being in business with them?" Peters said. "The decision was an easy one for me."
Negotiations began about a year ago and dragged on with crypto erasure, which wiped out nearly $1.5 trillion in symbolic securities in 2022.
After bidding up to nearly $69,000 in November 2021, investors and speculators alike deserted crypto like one scandal after another drained trust in digital assets. Sales and volume in San Francisco fell in 2022 and the company lost $2.63 billion annually.
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 obstacles to assure customer trust 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 remains on the sale with other members of the advisory board of a digital river, predicts that more consolidation will occur as cryptography matures.
"We will see much more strategic combinations," said Clayton in an interview. "Traditional financial actors are beginning to think about acquisitions of distributed ledgers or blockchain companies, particularly those without existing regulatory risk."