Bernstein sees growth in crypto derivatives amid easing rules

On Monday, a Bernstein analyst shed light on the evolving cryptocurrency market, emphasizing the potential growth due to a gradually more accommodating regulatory landscape. This shift has particularly benefited companies like Robinhood (HOOD), which has seen its stock surge 142.4% over the past year, according to InvestingPro data. The analyst highlighted that investment platforms are increasingly integrating multi-asset offerings, with broker/dealers and crypto exchanges converging their services. Traditional brokers have started to offer cryptocurrency tokens, while crypto exchanges are looking to include traditional equity and derivative products.

The analyst pointed out that the U.S. crypto derivatives market has significant potential for expansion, noting that offshore derivatives, such as perpetual futures, have traded at volumes three to four times that of the spot market. In comparison, the U.S.-based CME Group (NASDAQ:CME), which offers Bitcoin and Ethereum futures, saw approximately $2.5 trillion in annual volume, a fraction of the $31 trillion traded last year in BTC/ETH futures outside the U.S. The options market in the U.S. is in its infancy, limited to certain CME options on Bitcoin futures. However, with a more crypto-friendly SEC/CFTC, the analyst anticipates the U.S. onshore crypto market will grow across both spot and derivative markets.

Deribit, a privately held global leader in crypto options, primarily in BTC and ETH, captures about 70% of the market share outside the U.S. With monthly volumes exceeding $100 billion, Deribit’s annual revenues are estimated to be around $0.5 billion at the current rate. The company’s collaboration with Paradigm, an OTC institutional platform, brings in over half of Deribit’s options volume, indicating a higher institutional involvement. The analyst mentioned that Coinbase (NASDAQ:COIN)’s reported interest in acquiring Deribit seems logical, as it would enable Coinbase to delve into derivatives, particularly options, and compete with Binance in the international crypto derivatives market.

Kraken, another private firm, has announced a $1.5 billion acquisition of NinjaTrader, a U.S.-based equity futures platform. This move is set to bolster Kraken’s presence in the U.S. by providing a futures license and the potential to offer equity and forex futures. Kraken also holds licenses in the UK, EU, and Australia, which could facilitate the expansion of NinjaTrader’s services internationally.

Robinhood is integrating Bitstamp crypto exchange in the first half of 2025, aiming to offer a full suite of crypto exchange services and target the institutional crypto market. The CEO of Robinhood has expressed ambitions to incorporate blockchain technology for equity tokenization. The company’s strategic expansion comes amid strong financial performance, with InvestingPro data showing impressive revenue growth of 58.23% and a healthy market capitalization of $39.28 billion. InvestingPro analysis indicates that Robinhood is currently trading above its Fair Value, with 8 additional ProTips available to subscribers. The Bernstein analyst envisions a future where crypto exchanges and broker/dealers will offer a broader range of assets, including tokenized equities.

In related financial news, MicroStrategy has announced an offering of 8.5 million shares of perpetual preferred stock (STRF) to raise approximately $722.5 million for further Bitcoin acquisitions. The offering is part of MicroStrategy’s capital raise plan, and the preferred stock will provide a 10% annual dividend to shareholders. Additionally, Robinhood is collaborating with Kalshi, regulated by the CFTC, to launch a platform for users to predict outcomes in politics, economics, and sports. Trading at a P/E ratio of 27.47 with diluted earnings per share of $1.56, Robinhood demonstrates solid fundamentals. For deeper insights into Robinhood’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which covers this and 1,400+ other top US stocks. Coinbase has proposed recommendations to the SEC to clarify digital asset regulations, suggesting a distinction between digital commodities and securities, and urging the SEC to facilitate the tokenization of traditional securities.

In other recent news, Robinhood Markets (NASDAQ:HOOD) has introduced a prediction markets hub within its app, allowing users to trade on the outcomes of major events, such as federal funds rate targets and college basketball tournaments. This initiative represents a significant expansion for the company, traditionally known for its stock and cryptocurrency trading platforms. The prediction markets are set to launch across the U.S. in partnership with KalshiEX LLC, a CFTC-regulated exchange. CEO Vlad Tenev emphasized the role of prediction markets in harnessing market incentives and collective wisdom to predict event outcomes.

In addition, Mizuho (NYSE:MFG) Securities has maintained its Outperform rating on Robinhood with an $80 price target, citing the company’s strategic move into prediction markets as a growth opportunity. Compass Point also initiated coverage with a Buy rating and a $61 price target, highlighting potential revenue growth from cross-selling cryptocurrency products. KeyBanc Capital Markets reiterated an Overweight rating with a $75 target, expressing confidence in Robinhood’s financial model and product development. These recent developments underscore Robinhood’s efforts to diversify its offerings and enhance user engagement.

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