Bessie Liu

Macauley Peterson

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 <a href="https://blockworks.co/news/coinbase-acquires-regulated-futures-exchange-to-expand-derivatives-offerings">since it closed a $275 million deal for derivatives exchange FairX</a> 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 &amp; 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.&nbsp;



“I couldn’t be more thrilled with this outcome,” Peters said in a LinkedIn <a href="https://www.linkedin.com/pulse/wknd-notes-coinbase-acquires-one-river-digital-eric-peters/?trackingId=HKMFUcjeTw6fnfPUDeaOWQ%3D%3D" target="_blank" rel="noreferrer noopener">post</a>.



The digital asset management company offers advisory services for institutional clients — including commercial banks and pension funds.&nbsp;



It first caught the attention of the public after Bloomberg reported that it joined forces with <a href="https://blockworks.co/tag/alan-howard" target="_blank" rel="noreferrer noopener">Alan Howard</a> to become one of the largest <a href="https://www.bloomberg.com/news/articles/2020-12-16/bitcoin-whale-surfaces-with-1-billion-and-alan-howard-s-backing" target="_blank" rel="noreferrer noopener">holders</a> 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.”



<a href="https://blockworks.co/news/hedge-fund-manager-brevan-howard-investing-in-digital-assets">Brevan Howard acquired a 25% stake</a> 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 <a href="https://s27.q4cdn.com/397450999/files/doc_financials/2022/q4/Shareholder-Letter-Q4-2022.pdf">letter</a> 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 <a href="https://blockworks.co/tag/one-river-digital-asset-management" target="_blank" rel="noreferrer noopener">One River</a> 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.&nbsp;



After recognizing both firms&#8217; 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 <a href="https://www.coinbase.com/blog/coinbase-has-acquired-one-river-digital-asset-management" target="_blank" rel="noreferrer noopener">announcement</a>, 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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Coinbase’s One River Acquisition Marks First in a Year

Sebastian Sinclair

Cryptocurrency-fund manager One River Digital Asset Management has integrated a new product leveraging Coinbase Prime&#8217;s turnkey solutions, in a bid to drive institutional investors to its fund.



One River, backed by billionaire fund manager Alan Howard, announced the establishment of its separately managed account ONE Digital SMA, in a statement, Friday. The account seeks to deliver &#8220;institutional-quality digital investment strategies&#8221; for Coinbase Prime users.



Coinbase Prime is the exchange&#8217;s turnkey solution for brokerages, exchanges and financial tech companies. Prime touts post-trade and real-time reporting, as well as historical analytics, smart order routing and cold storage custody solutions.



“ONE Digital SMA is fundamental to how investment strategies and services will be delivered to institutions and private wealth platforms in the future,” said Eric Peters, CEO and CIO of One River.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Blockchain technologies allow vastly more efficient trading and settlement, and this will push the financial system to tokenize the majority of real and financial assets.&#8221;</blockquote>



The account, offered via Coinbase Prime, provides an institutional index and active strategies, the companies said. It is currently available to large players.



Wealth Management firms and financial advisors will, in time, also be able to manage an increasingly larger proportion of their clients’ assets, especially as asset tokenization &#8220;accelerates,&#8221; the companies said.



“As asset owners continue to move from digital research towards digital implementation in 2022, we are finding that many clients prefer to own digital assets in their own segregated account,” said Brett Tejpaul, Head of Coinbase Institutional in the statement.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> “These asset owners also want the same quality of investment management services that they are accustomed to in traditional investments.&#8221; </blockquote>



One River, which has <a href="https://aum13f.com/firm/one-river-asset-management-llc" target="_blank" rel="noreferrer noopener">$2.1 billion</a> in assets under management, raised $41 million in a Series A back in September that included the likes of Coinbase and Bloomberg. One River&#8217;s <a href="https://www.oneriveram.com/academic-regulatory-advisory-council" target="_blank" rel="noreferrer noopener">advisory council</a> includes former US Securities and Exchange Commission Chair Jay Clayton and former General Counsel of the CIA Courtney Simmons Elwood.



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One River Taps Coinbase Prime to Further Institutional Adoption Push

Jacquelyn Melinek

<div id="highlights-block_61770986fc0f5" class="highlights">
 <ul>
 <li>Digital assets are providing younger generations with the opportunity to gain control to toppel the quasi-corrupt edifice that was built to not favor the younger generations but older people who have profited off other asset classes, Peters said</li>
 <li>The power of crypto is creating a transformation like nothing he’s ever seen before in his career, Peters said</li>
 </ul>
 
</div>



People and institutions that have built their careers around identifying emerging trends and good investment opportunities are puzzled by crypto, but are increasingly being drawn to it, Eric Peters, founder, CEO and CIO of One River Digital Asset Management said.&nbsp;



“I think it is a transformation and definitely is the most interesting macro opportunity and macro investment thesis I’ve seen in my career,” Peters said during the Bankless podcast <a href="https://www.youtube.com/watch?v=NMPiGjxdH0E" target="_blank" rel="noreferrer noopener">Episode 89 </a>on Monday. “The connection to legacy financial systems — let&#8217;s call it Wall Street with new technologies — is going to first happen in the pools of capital directed by a limited number of people as opposed to some big investment committee,” he added.&nbsp;



The power of crypto is creating a transformation like nothing he’s ever seen before in his career, Peters said.&nbsp;



One River Digital Asset Management is a US SEC registered investment advisor that manages over $2 billion in institutional assets as of September. The firm was founded in 2013 but entered the crypto space in November 2020 when it bought over $600 million in bitcoin and ethereum, with the purchase “weighted more heavily toward bitcoin,” Peters said. “We felt that all our clients should be allocated to these assets,” he said.&nbsp;



Since November 2020, clients have gained over $1.2 billion from that purchase, according to a <a href="https://www.prnewswire.com/news-releases/one-river-digital-asset-management-completes-strategic-investment-round-301381262.html" target="_blank" rel="noreferrer noopener">statement</a> by the firm. Peters said he encourages everyone at his firm and its clients to think about the resistance crypto is facing as an opportunity.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“The power of these [crypto] technologies hold the potential to lead to dystopia or renaissance,” Peters said during the podcast. “The path toward renaissance is consistent with the development of bitcoin,” he added. </blockquote>



In late September, the firm closed a Series A investment round for an undisclosed amount, but plans to use the money toward its mission of being the lead institutional investment manager in digital assets.&nbsp;



<h3 class="wp-block-heading">“There’s no lost sleep”</h3>



While traditional financial institutions begin to dip their toes into digital assets, Peters said it’s natural for some institutions to not fully embrace crypto because of regulatory concerns and constraints. “If they could all do it right now, Coinbase wouldn’t exist if legacy financial institutions were able to take the risk that those guys took,” Peters said. “Look at the value they created,” he added.&nbsp;



But even though legacy institutions aren’t embracing opportunities in this space, it’s not worth “getting hung up on,” he said. “In some cases, they can’t (get involved) because the regulatory environment doesn’t allow them to and in other cases maybe they could but the risk reward isn’t high enough relative to their perceived opportunity,” Peters said. “[But] it doesn’t matter because we are a better country and economy to have creative disruption define the future,” he added.&nbsp;



The companies involved getting involved and being built on crypto and blockchain infrastructure will lead to a much more innovative future, he said. “There’s no lost sleep” over why legacy institutions aren’t getting involved and unfortunately they don’t want to tear down what they built for a new opportunity, he added.&nbsp;



<h3 class="wp-block-heading">Generational divide</h3>



While there are a lot of lines that divide society, whether it’s rich vs. poor, young vs. old, there’s also intersections within those lines, Peters said.&nbsp;



But, when people think about the macro level, it’s important to try to figure out how to distribute the spoils of the economic output across these lines to prevent upheaval, while also creating incentive structures that propel it forward, he added.&nbsp;



“What we have now, ironically, we have the youth that is revolutionary and it’s through blockchain technology,” Peters said.&nbsp;



Unlike the time between 1960s to the 1980s, when younger professionals had no power, the multi billionaire people in their 20s to 30s right now are in control, Peters said.&nbsp;



Digital assets are providing younger generations the opportunity to gain control to toppel the quasi-corrupt edifice that was built to not favor the younger generations but older people who have profited off other asset classes, Peters said. “We have this huge imbalance and all of a sudden this new technology magically appears and could provide the lever to rebalance the system,” he said.&nbsp;



“There’s always a risk that people lose faith in fiat, and that is a risk that has existed throughout the history of mankind,” Peters later said.&nbsp;



<h3 class="wp-block-heading">The gold cross-over level</h3>



In the future, Peters <a href="https://cms.blockworks.co/one-river-ceo-bitcoin-will-be-worth-more-than-gold/" target="_blank" rel="noreferrer noopener">expects</a> that bitcoin will eventually become “way more valuable than gold.”



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“People currently look at bitcoin as digital gold and I think that it’s helpful for people to have a mental model or framework to think about anything brand new because otherwise they’re just lost. I think it’s a reasonable mental model to have,” he said. “As we approach that level, or surpass that gold cross-over level, people will start seeing that it wasn’t the right framework&#8230;We’ll end up seeing that gold is a metal. It hasn’t changed in billions of years and bitcoin will evolve over the next couple of years. So I think that’s one thing which makes me really positive on this whole space,” he added.&nbsp;</blockquote>



After seeing macro inputs, the technological changes and paradigm shifts in the crypto space, the digital asset industry is unlike things Peters said he’s ever seen historically.&nbsp;&nbsp;



“I think we can have the largest speculative boom in history,” Peters said. “I think we could be in the early stages of just remarkable moves,” he added.&nbsp;