The leading cryptocurrency exchange in the United States, Coinbase has come up with new trading features for retail traders. This move will enable small-scale retail traders to trade in crypto futures.
Quick Take:
- Coinbase offers crypto futures to US-based retail traders.
- The exchange will offer nano-sized Bitcoin and Ethereum futures to its customers.
- With increased crypto derivatives offerings, the trading platform looks to increase its consumer base.
As per the announcement of the exchange, the company is now allowing eligible US traders to access crypto futures through Coinbase Financial Markets. This move comes four months after CFM was granted permission to operate a Futures Commission Merchant (FCM) from the National Futures Association.
The platform got regulatory permission on August 17 from NFA which is a Commodity Futures Trading Commission organization. Moreover, this move has increased the trading options available to US-based retail traders, inviting more people to explore the crypto market.
CEO of Coinbase Financial Markets Andrew Sears wrote,
“Futures provide traders with the ability to hedge their risk, diversify their portfolios, trade with leverage and speculate on which way the market will go — either up or down.”
In further details, it was shared that the exchange has sized these futures contracts at 1/100th of a Bitcoin and 1/10th of an Ethereum. These nano-sized futures contracts will help in controlling the demographics of the service offered. Traders can also manage the risks through these nano contracts.
Sears also added,
“These contracts offer lower upfront capital requirements and can be an affordable investment option for a broader range of retail customers.”
Coinbase Moves Along With Global Trends
The renowned crypto exchange is in coherence with the rising demand for crypto derivatives throughout the globe. As per an estimate, crypto derivatives account for 75% of the global crypto trading volume.
Other prominent exchanges that offer futures contracts include Binance, the Chicago Board Options Exchange (CBOE), and the Chicago Mercantile Exchange (CME). CME only falls second to Binance in Bitcoin futures contracts volume.
Despite the hype surrounding futures trading, Coinbase has also warned its users of the risks associated with them. Even though trading with leverage has the potential of huge gains but at the same time it can lead to a complete wipeout of the initial investment if the market makes a surprise move.
Therefore, Coinbase suggested its users to stay cautious. The exchange further clarified that all futures contracts will be settled in US dollars. Nonetheless, Coinbase is continuing to expand its operations and target more investors and traders. The firm also launched the Coinbase Derivatives Exchange last year, paving the way for the inclusion of third-party brokers and market makers.
As a result of its measures, Coinbase recorded $76 billion in spot trading volume, which was a 52% drop in its spot trading volume when compared to the same time frame of 2022. However, the exchange has been gaining market share since the last quarter.
On the other hand, the Securities and Exchange Commission (SEC) is making Coinbase’s expansion plans more and more complex. The regulatory authority charged the exchange over its registration earlier this year. In response, the exchange questioned the SEC’s jurisdiction to make such accusations.
