Coinbase Launches First Crypto Derivatives Product for Retail Traders

Coinbase Derivatives Exchange, formerly FairX, is preparing to launch its first listed crypto derivatives product on June 27. Coinbase announced on June 24, noting that the product is dubbed Nano Bitcoin Futures (BIT). The exchange has lowered the barrier to entry by setting the size of eachBIT contract to 0.01 Bitcoin (BTC).

According to the announcement, BIT futures will be available for trading through several intermediaries. These include brokerage firms like EdgeClear, Ironbeam, NinjaTrader, Optimus Futures, Stage 5, and Tradovate. Additionally, the product will be available through clearing houses like ABN AMRO, ADMIS, Advantage Futures, ED&F Man, Ironbeam, and Wedbush.

However, this is a temporary option before Coinbase’s futures commission merchant (FCM) license gets regulatory approval. After securing the FCM license, Coinbase will offer clients margined futures contracts directly.

Explaining why it decided to roll out a futures product for retail traders, Coinbase said:

The crypto derivatives market represents $3Tn* in volume worldwide and we believe that additional product development and accessibility will unlock significant growth.

The exchange added that BIT would allow all types of traders to access regulated US derivatives markets. This access would, in turn, allow traders to express their views or hedge their underlying cryptos. 

Race to Launch Crypto Derivatives Intensifies

This news comes after Coinbase purchased FairX in January. With FairX being a CFTC-regulated company, Coinbase got an avenue to roll out crypto derivatives seamlessly.

At the time, Coinbase said:

The development of a transparent derivatives market is a critical inflection point for any asset class and we believe it will unlock further participation in the crypto economy for retail and institutional investors alike.

Apart from Coinbase, other leading cryptocurrency exchanges in the US are also eyeing the derivatives market. FTX.US acquired LedgerX in October last year and rebranded the company FTX US Derivatives.

Crypto.com also inked a deal to purchase North American Derivatives Exchange (Nadex) from IG Group. Crypto.com CEO Kris Marszalek said this acquisition builds on Crypto.com’s promise to offer customers access to a new set of financial tools.

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As exchanges race to offer crypto derivatives, experts claim the products are not ideal for retail traders. Paul-Willem Van Gerwen, an official at the Dutch Authority for the Financial Markets, believes crypto derivatives are rife with criminal activities. Specifically, Van Gerwen said crypto derivative markets are opaque and are susceptible to manipulation.

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