Coinbase Derivatives Exchange, previously FairX, is introducing its first crypto derivatives product this month to attract more retail traders.
Coinbase has relaunched FairX as the Coinbase Derivatives Exchange. Its first listed crypto derivatives product is “nano Bitcoin futures”—1/100th of a Bitcoin, offered under the ticker BIT.
This is the first step toward establishing a viable and regulated crypto derivatives market.
According to a statement given to CoinDesk, the CFTC-regulated futures exchange will launch its derivatives product, Nano Bitcoin futures (BIT), on June 27. “We anticipate that greater product innovation and accessibility will unlock tremendous growth in the crypto derivatives sector,” the statement stated.
Coinbase also stated that it is awaiting regulatory permission for its own futures commission merchant (FCM) license in order to provide its clients with margined futures contracts.
The debut comes at a time when the crypto market is very unpredictable, as seen by the stunning collapses of Terra’s LUNA, crypto lender Celsius, and crypto firm Three Arrows Capital (3AC). Bitcoin’s price has dropped nearly 56% this year, while Ethereum’s native token ether has fallen about 70%.
Coinbase acquired FairX early this year in order to introduce cryptocurrency derivative products. After getting regulatory clearances in late 2020, FairX started its futures trading platform in May 2021.
Coinbase purchased FairX in January 2022 as part of its objective to provide users with crypto futures and options trading. FairX has previously sold futures contracts and was regulated by the federal Commodity Futures Trading Commission (CFTC), giving Coinbase a head start in the $3 trillion crypto derivatives industry.
If BIT futures were currently available, they would be valued at roughly $211, based on the current BTC price of $21,000.
FairX brought in a “world-class staff with significant knowledge in product design, industry structure, regulation, market-leading exchange technology, and a demonstrated capacity to provide listed futures,” according to Boris Ilyevsky, Head of Coinbase Derivatives Exchange.
When combined with Coinbase’s user-friendly interface, the derivatives exchange promises to make trading crypto derivatives far more accessible.
Futures are a sort of derivative financial contract that establishes a future date and price at which an item must be sold, despite the real market price at the moment. When the SEC eventually permitted a Bitcoin ETF in October, it only allowed a Bitcoin futures ETF, not a “spot” ETF based on the current price of Bitcoin.
Many traders favor futures because they allow for round-the-clock trading, a lesser initial commitment, and “the convenience of going long and short,” according to Ilyevsky. “Our BIT futures contract will provide the same benefits but is designed for retail traders.”
After acquiring LedgerX in August, rival exchange FTX is on a similar path. Binance also provides derivatives products but has limited their availability in select areas due to regulatory concerns.
It’s worth noting that BIT futures will not be available directly via Coinbase but rather through third-party retail brokers and clearing organizations. Coinbase BIT futures will be accessible via organizations such as EdgeClear, Ironbeam, NinjaTrader, Optimus Futures, Stage 5, and Tradovate beginning on June 27.
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