Coinbase Launches Its First Crypto Derivative Product
- Coinbase is exploring the derivatives sector despite announcing an 18 percent layoff of its staff earlier this month.
In preparation for future growth prospects, Coinbase global inc (NASDAQ: COIN) has announced that it will launch a crypto derivative product on Monday. Reportedly, the crypto derivative product is a nano Bitcoin futures contract (BIT). Additionally, the company noted that each bit represents 1/100 of a Bitcoin.
Among the expected customers include ABN, Wedbush, Ambro, and other clearing firms. Also, the contracts will be available for trading on third-party retail brokers such as Tradovate, NinjaTrader, EdgeClear, Stage 5, Ironbeam, and Optimus Futures.
Coinbase is exploring the derivatives sector despite announcing a layoff of 18 percent of its staff earlier in the month. The biggest US crypto exchange blamed the worsening crypto market situation for the dismissals.
Coinbase fueled speculation that it is about to launch a crypto derivative product following its purchase of FairX. FairX is regulated under the CFTC as a designated contract markets (DCM) exchange.
Part of the official statement reads, “the global trade volume of the crypto derivatives market is about $3 trillion. Hence, we believe we can unlock significant growth with more product development and accessibility.”
With this launch, Coinbase joins the elite few operators in the US crypto derivatives market. The strict regulation in the US crypto derivatives market is why it has few operators. However, there are many crypto derivative products outside the US.
Coinbase and the Market Outlook
For a long time, futures and options products have been non-existent in Coinbase’s product portfolio. Coinbase might have been forced to launch its first crypto derivative following the significant decline in spot trading volumes this year. A substantial decrease in spot trading volumes also means a massive drop in Coinbase’s revenue. Coinbase earns the majority of its revenue from spot trading.
Over the past few weeks, Bitcoin fell sharply off its all-time high of last November. As is the usual case, the prices of other cryptos have also experienced sharp drops.
Insolvency issues at several crypto lending firms and hedge funds have been the primary cause of this sharp decline. The insolvency issues at celsius network and three arrows have been the most notable ones.
According to our data, Bitcoin has been down 29 percent in the last 30 days. Also, Bloomberg data shows that Coinbase shares are down by about 77 percent this year. Boris Illyevsky, who heads Coinbase derivatives exchange, commented on this launch.
He said, “compared to traditional futures products, it requires less upfront capital to trade 1/100th of a Bitcoin. Hence, many investors have the chance to participate in US regulated crypto futures markets.”
According to the company’s statement, the futures will be available on the platform’s derivatives exchange. You’d recall that Coinbase now owns a derivatives exchange after recently acquiring FairX, a futures exchange. However, Coinbase is still unable to offer futures to clients. It is waiting for the approval of its operating license to become a futures commission merchant (FCM).