FalconX Acquires Arbelos Markets to Expand Crypto Derivatives Trading
The latest crypto M&A deal reflects the segment's evolution in 2024.
Digital asset prime broker FalconX acquired trading firm Arbelos Markets to position itself as a major player in crypto derivatives trading. The institutional market has seen substantial growth, driven by regulatory developments and the expansion of ETF and derivatives markets.
FalconX stated that crypto derivatives are expected to grow significantly, potentially exceeding spot market volumes. Following the launch of bitcoin ETFs in January, the SEC approved options on BlackRock’s iShares Bitcoin Trust (IBIT), which allows investors to buy or sell at predetermined prices within specific timeframes.
Industry experts believe these options will enhance liquidity and price discovery for spot ETFs, attracting institutional investors seeking to manage bitcoin exposure amid fluctuating market conditions. Michael Klena from Architect Partners described the acquisition as a logical progression due to increased demand and supply dynamics.
Regulatory changes and anticipated crypto-friendly frameworks enable larger firms to pursue acquisitions confidently. The presence of numerous emerging crypto derivatives firms without a dominant leader supports this trend. Klena noted that derivatives typically yield higher margins than spot trading, prompting firms to diversify their offerings as trading fees decline.
Previous acquisitions include Cboe Global Markets' purchase of ErisX in 2022 and Coinbase's acquisition of FairX. Klena remarked that earlier deals occurred before significant regulatory clarity emerged, but current sentiments indicate improved timing for such transactions.
Arbelos Markets CEO Joshua Lim emphasized the increasing acceptance of crypto as a portfolio diversifier, marking this as a critical moment for the merger. BlackRock recently suggested a 1-2% allocation to BTC as reasonable, further supporting this perspective.
Following the election, there has been a surge in crypto M&A activity, with Klena anticipating more deals focused on derivatives trading and infrastructure.