This month, Coinbase Derivatives Exchange, formerly FairX, will introduce its first cryptocurrency derivatives product to draw in more retail traders. To introduce cryptocurrency derivatives products, Coinbase, earlier this year, purchased FairX. After getting regulatory clearances in late 2020, FairX started its futures exchange platform in May 2021. Coinbase Derivatives Exchange announced in a blog post on Thursday that it would “launch its first listed crypto derivatives product on June 27, 2022: Nano Bitcoin futures contract (BIT), with each contract sized at 1/100th of a bitcoin.”
USD-Settled Index Future
According to a notification on the Coinbase Derivatives website, the initial offering is a USD-settled index future. The fact that brokerages rather than Coinbase itself will offer the futures is crucial to the launch. The debut coincides with a period of extreme market volatility brought on by the catastrophic failures of Terra’s LUNA. Cryptocurrency lender Celsius and cryptocurrency fund Three Arrows Capital (3AC). This year, Bitcoin’s price decreased by about 56%, while the cost of ether, the native token of Ethereum, has reduced by about 70%. To directly provide margined futures contracts to our clients, Coinbase is seeking regulatory clearance on its own futures commission merchant (FCM) license, according to the post.
Participation of Retailers
Futures contracts can be used as a hedge for trading techniques by institutional and retail traders alike because they are smaller in size and need less upfront cash than regular bitcoin futures products.
According to the statement, “it presents a real prospect for considerable expansion of retail participation in the US regulated crypto futures markets and requires less upfront capital than typical futures products at 1/100th of the size of a Bitcoin.”
Nevertheless, derivatives are not universally seen as a product that retail traders should use. A senior Dutch financial regulator recently said that trading in crypto derivatives should be limited to wholesale markets exclusively due to the possibility of manipulation and other illegal conduct.