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Kraken has acquired London’s Crypto Facilities in a strategic deal aimed at increasing the company’s presence in Europe. Kraken now becomes the first crypto exchange to provide both futures and spot trading.
San Francisco-based cryptocurrency exchange, Kraken, has acquired UK-based Crypto Facilities, a cryptocurrency exchange, and futures provider. The company made this announcement in a press release on February 4. Crypto Facilities is fully regulated by the United Kingdom’s Financial Conduct Authority. It began operating in 2015 and the acquisition gave Kraken a significant foothold in the European market.
The companies declined to state the exact figure involved in this deal. However, they said that it is a ‘nine-figure deal’ which means at least $100 million. In 2018, Kraken conducted a round of layoffs that were a bit mystifying. On the other hand, this deal shows that the company is now emerging from the persistent crypto winter.
Although Kraken CEO Jesse Powell confirmed that 57 employees lost in Halifax, he said the company was aggressively hiring in all other areas. In the press release to announce the new acquisition, Powell said that:
“We are excited to introduce eligible clients to these industry leading futures and index products. Over the coming months, our teams will continue to enhance and expand these offerings. ”
In the same context, Timo Schlaefer, Crypto Facilities CEO and Founder, added that:
“It has been our mission to build the most sophisticated, powerful and user-friendly cryptocurrency trading platform. Joining hands with Kraken allows us to innovate the next generation of products and massively boosts the value we are able to offer to our clients.”
Kraken Joins the Bitcoin Derivatives Arena
This move is a response to #10 competitor Huobi Global, whose derivatives market launched in November, has experienced rapid growth. Kraken had the capability to develop an in-house derivatives platform. Instead, they followed the Google approach of acquiring the best available and putting it to work for the existing clients.
Crypto Facilities will maintain its operations in London benefiting from the regulations set by the Financial Conduct Authority. The regulator is ranked among the most forward-looking and innovation-focused regulators worldwide. Kraken is expected to roll the customers into its platform if the acquisition follows the CAVIRTEX and Coinsetter acquisition paths. Even though the company remains in London, it will eventually change into a Kraken-branded product.
Powell said that the acquisition will help attract institutional customers and increase Kraken’s revenue. He also added that the company’s strong balance sheet enabled it to attain the London Company outright. The deal has been in the pipeline for ten months, But, Kraken was waiting for the U.K. regulator Financial Conduct Authority’s approval.
Strategically, the merger helps Kraken become a one-stop shop for trading. The CEO and founder of Crypto Facilities, Timo Schlaefer, a former Goldman Sachs executive, will retain his current role. This deal is ranked as the biggest yet for Kraken.
Previously, the San Francisco-based company has acquired many smaller exchanges, a digital wallet firm and a crypto research firm. It now adds 20 developers in London to its ranks. The deal comes when other major crypto exchanges like Coinbase and Binance are striving to scale up their global operations.
The Next Crypto Trading Frontier
Kraken has joined BitMEX and Huobi in offering derivatives. Binance’s Changpeng Zhao believes that the crypto market can grow by over 1,000 times. He also believes that the derivatives market is much bigger than the crypto markets. On a daily basis, BitMEX registers almost $1 billion in trades.
It is evident that crypto asset prices derive from spot trading. Hence, derivative markets have limited effect. But, sentiments on derivative platforms can influence the prices of digital assets. The potential for the derivatives exchanges is almost unlimited. Cryptocurrency contracts offer immense volatility and potential for profits.
The volumes for these exchanges can rise extremely when combined with leveraged trading. Therefore, this acquisition can help Kraken to tremendously increase its innovative abilities and profits.