Coinbase will launch its first derivatives product, a Bitcoin futures contract with a cash settlement dubbed the “Nano” Bitcoin futures contract.
The Coinbase Derivatives Exchange, which Coinbase bought in January of this year and was originally known as FairX, will introduce its first listed cryptocurrency derivatives product.
The so-called “Nano” Bitcoin futures contract will start trading on June 27 under the ticker BIT, according to a blog post published on Friday. Each contract will be settled in cash, or more specifically, U.S. dollars, and have a size equal to one hundredth of a Bitcoin.
It’s interesting to note that the BIT contracts will initially only be traded through independent brokers and clearing companies.
To be able to directly provide margined futures contracts to its clients and consumers, Coinbase is now seeking for permission from the Commodity Futures and Exchange Commission on its own futures commission merchant (FCM) license.
According to a blog post by Boris Ilyevsky, CEO of Coinbase Derivatives Exchange, “The crypto derivatives market represents $3Tn* in volume globally and we expect that future product development and accessibility will generate tremendous growth.”
To enable all types of traders to access regulated U.S. crypto derivatives markets to express their opinions or hedge their underlying crypto assets, it is more crucial than ever to expand the market for futures.
With less initial capital required than conventional futures contracts, Coinbase’s new Bitcoin futures product is designed with retail traders in mind. Given that the U.K.’s Financial Conduct Authority forbade the sale and marketing of cryptocurrency derivatives to retail traders in the nation in 2019, this action is fairly contentious.
Similar sentiments were also expressed more recently, in May, by the Dutch Authority for Financial Markets (AFM), which said that “trading in crypto derivatives should be restricted to wholesale trade.” However, due to a lack of regulatory authority, the AFM has not yet been able to limit retail-oriented crypto derivatives in the nation.
Coinbase faces crypto winter
In a blog post, Coinbase CEO and co-founder Brian Armstrong stated that “we appear to be entering a recession after a 10+ year economic boom.” The “crypto winter,” down times in the cryptocurrency market that have traditionally impacted the company’s trading revenues, might result from a recession, he explained.
Following staff reductions, Coinbase expanded into derivatives. In order to maintain its viability during the present economic slump, the company earlier in June said it would be letting go of about 18% of its personnel.
The U.S.’s largest cryptocurrency exchange may need the new derivatives product, which will enable regular traders to hedge their Bitcoin positions during the present bear market, in order to increase trading revenues following the lackluster launch of its NFT marketplace last month.
