Coinbase Launches First Crypto Derivatives Product Aimed at Retail Traders

Coinbase Derivatives Exchange hopes to capitalize on a market that is $3 trillion in volume worldwide and provide hedging options for traders.

AccessTimeIconJun 24, 2022 at 12:23 a.m. UTC
Updated May 11, 2023 at 6:53 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Coinbase Derivatives Exchange, formerly known as FairX, is launching its first crypto derivatives product this month, hoping to attract more retail traders.

The futures exchange, which is regulated by the Commodity Futures Trading Commission (CFTC), will launch its derivatives product, Nano Bitcoin futures (BIT), on June 27, according to a statement sent to CoinDesk. “The crypto derivatives market represents $3T in volume worldwide and we believe that additional product development and accessibility will unlock significant growth,” the statement said.

Coinbase said it's also awaiting regulatory approval on its own futures commission merchant (FCM) license to offer margined futures contracts for its clients.

The launch comes at a highly volatile period in the crypto market, set off by the dramatic collapses of Terra’s LUNA, crypto lender Celsius and crypto fund Three Arrows Capital (3AC). Bitcoin’s price has fallen about 56% this year, while Ethereum’s native token ether is down roughly 70%.

Coinbase bought FairX earlier this year to launch crypto derivatives products. FairX launched its futures exchange platform in May 2021 after receiving regulatory approvals in late 2020.

Retail participation

Futures contracts are smaller in size, require less upfront capital than traditional bitcoin futures products and can be used as a hedge for trading strategies for both institutional and retail traders. “At 1/100th of the size of a Bitcoin, it requires less upfront capital than traditional futures products and creates a real opportunity for significant expansion of retail participation in US regulated crypto futures markets,” according to the statement.

However, not everyone sees derivatives as a product suitable for retail traders. Most recently, a senior Dutch financial regulator said that crypto derivatives trading should be restricted to wholesale markets only, citing risks of manipulation and other criminal activity.

In 2020, The U.K. watchdog, Financial Conduct Authority (FCA), banned crypto derivatives for retail consumers, saying that the products are ill-suited due to the risks they pose.

However, large banks including Nomura, Goldman Sachs and JPMorgan have already started trading crypto derivative contracts, giving their clients a way to trade the volatility in the crypto market and protect against downside risks.

Initially, the BIT futures will be available for trading via several leading broker intermediaries, including retail brokers EdgeClear, Ironbeam, NinjaTrader, Optimus Futures, Stage 5, and Tradovate, and clearing firms ABN AMRO, ADMIS, Advantage Futures, ED&F Man, Ironbeam and Wedbush, according to the statement.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Aoyon Ashraf

Aoyon Ashraf is managing editor with more than a decade of experience in covering equity markets


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.