Coinbase Attempts to Plug Void in Crypto Perpetuals Left by FTX

An analyst says Coinbase is "well positioned" to capture derivatives market share.

AccessTimeIconSep 29, 2023 at 8:49 a.m. UTC

Cryptocurrency exchange Coinbase (COIN) announced this week that it had received regulatory approval in Bermuda to list perpetual futures to users outside of the United States.

The move comes as no surprise, Coinbase acquired a license in Bermuda to operate a spot exchange back in April following a gung-ho approach from U.S. regulators, with the ultimate intention of rolling out a perpetual futures platform.

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  • Perpetual futures are a type of cash-settled derivatives contract that allow traders to "long" or "short" an underlying asset with leverage. Instead of the contract expiring every month or quarter, perpetual swap traders pay a funding rate that represents the difference between the mark and index price of the underlying asset, this ensures that pricing stays efficient.

    Following last year's collapse of FTX, which was the largest crypto futures platform at the time, overall liquidity and trading volume across the crypto market plummeted. Almost one year later and the market is still reeling from that slump, with thin liquidity remaining heavily concentrated across a handful of exchanges.

    Binance currently dominates the crypto market in terms of trading volume. Its spot market has racked up $6 billion in volume compared to Coinbase's $1.2 billion, for derivatives, meanwhile, Binance generated $32 billion in trading volume over the past 24-hours, equating to around $9.6 million in daily revenue from trading fees. If Coinbase can capture a portion of this market, it has the potential to continue its streak of beating revenue estimates.

    Kaiko analyst Riyad Carey told CoinDesk that Coinbase is "well positioned" to capture some of that forgotten market share.

    "Regarding Coinbase, I do think that it's well positioned to capture significant market share," Carey said. "Given Binance's recent troubles it stands to reason that larger traders and institutions may be skittish to hold significant funds on the exchange. On the other hand, Coinbase is one of the most trusted exchanges, which sets them up nicely."

    Coinbase's share price rose by 5.09% on Thursday, suggesting renewed optimism amongst investors as the Nasdaq-listed exchange adds another revenue stream to its arsenal.

    Edited by Parikshit Mishra.

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    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 employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Oliver Knight

    Oliver Knight is a CoinDesk reporter based between London and Lisbon. He does not own any crypto.


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