The last few weeks have been eventful for Coinbase, with most of it being harmful. Despite this, the crypto firm is resolved to reclaim its reputation. According to reports, this month, the first crypto derivatives product from Coinbase Derivatives Exchange, formerly known as FairX, will be available. The goal of the launch is to entice more retail traders.
Coinbase rolls out Nano BTC amid market downturns
On Monday, Coinbase Global Inc. will launch its first crypto derivative product amid the current crypto winter. On June 27, the CFTC-regulated futures market will debut its derivatives product, Nano Bitcoin futures (BIT).
The crypto derivatives market represents $3T in volume worldwide and we believe that additional product development and accessibility will unlock significant growth.
Coinbase
The world’s largest cryptocurrency exchange, says that each Nano Bitcoin futures contract (BIT) will represent 1/100th of the token. The contracts will be accessible for trade only through a variety of third-party retail brokers and clearing firms, including ABN AMRO and Wedbush.
The BIT contract will be Coinbase’s first listed cryptocurrency derivatives product as volumes in the sector continue to break records — in the trillions of dollars. According to recent research by CryptoCompare, cryptocurrency derivatives volumes were around $3.19 trillion for May. According to the study, the derivatives market now accounts for 61.7% of the overall cryptocurrency market.
Coinbase also said it is waiting for regulatory approval on its own futures commission merchant (FCM) license to provide margined futures contracts to customers.
The debut comes at a time when the cryptocurrency market is extremely volatile, with the spectacular collapses of Terra’s LUNA, crypto lender Celsius, and crypto fund Three Arrows Capital (3AC) contributing to it. Bitcoin’s price has dropped 56% this year, while Ethereum’s native currency, ether, has fallen by around 70%.
Coinbase is exploring derivatives after announcing earlier this month that it will fire 18% of its staff due to weakening market conditions. Futures and options, which allow investors to hedge their bets by agreeing to buy or sell coins at a certain price on a particular day, have long been a glaring deficiency in the firm’s offering.
Crypto derivatives get support and backlash in equal measure
The majority of Coinbase’s revenue comes from spot trading, which has decreased substantially in recent months. Since Bitcoin hit its all-time high in November, crypto prices have been dropping steadily, and last month’s downturn was particularly dramatic.
According to CoinMarketCap, bitcoin has lost 29% in the previous month. According to Bloomberg data, Coinbase’s stock prices have dropped almost 77 percent so far this year. Futures contracts are smaller than traditional bitcoin futures products in size. They need a less initial investment, allowing them to be utilized as a hedge for both institutional and retail traders.
At 1/100th of the size of a Bitcoin, it requires less upfront capital than traditional futures products and creates a real opportunity for significant expansion of retail participation in the US regulated crypto futures markets.
Boris Ilyevsky, head of Coinbase Derivatives Exchange
The cryptocurrency futures will be offered via the Coinbase Derivatives Exchange, which was formed as a result of the recent acquisition of FairX, a futures exchange. After receiving regulatory approvals in late 2020, FairX began operating its futures exchange platform in May 2021.
However, not everyone considers derivatives to be a product suitable for retail traders. Most recently, a senior Dutch financial regulator recommended that crypto derivatives trading should be confined exclusively to wholesale markets due to the potential for fraud and other criminal activity.
In 2020, the Financial Conduct Authority (FCA) in the United Kingdom prohibited crypto derivatives for ordinary consumers, stating that they are poorly suited due to their dangers.
However, large banks such as Nomura, Goldman Sachs, and JPMorgan have already offered crypto derivative contracts to their clients for them to profit from the volatility of the cryptocurrency market and limit risk.
The BIT futures will initially be available for trading on various major broker intermediaries, including EdgeClear, Ironbeam, NinjaTrader, Optimus Futures, Stage 5, and Tradovate.
Coinbase launches support for ETH and USDC transfers on Polygon
According to a Twitter post, Coinbase users will be able to send and receive Ethereum (ETH), Polygon (MATIC), and USD Coin (USDC) on Polygon throughout the next month. Coinbase has enabled the ability to transmit and receive these assets on an L2 or sidechain owing to the Polygon integration.
Coinbase has announced that its integration will allow customers to convert fiat and fund their Polygon and Solana wallets in a matter of minutes. Polygon and Solana offer MATIC and SOL as their native assets, but native stablecoins will also be supported.
An official blog post from the world’s largest cryptocurrency exchange explains why it made the change. According to the article, sending bitcoin on Ethereum has become increasingly costly, effectively eliminating millions of people from the system.
Although Polygon and Solana have gained popularity in recent years as a result of these high gas prices, it is difficult and time-consuming to obtain funding for these networks. According to Coinbase, it intends to reduce time, effort, and high costs by allowing consumers to convert fiat currencies into cryptocurrencies and deposit funds into Polygon and Solana wallets in minutes at a fraction of the cost.
By combining the cross-chain trading capabilities of Solana with Polygon and Ethereum, this method allows for more direct deposits and withdrawals across all three chains, as well as trading and settlement in the same order book independent of the chain used to deposit funds.
The exchange’s latest move is the most recent in a long line of improvements by Coinbase, which has been released against the backdrop of increasing competition among exchanges as the bear market draws to a close. Binance.US, for example, announced zero-fee bitcoin trading not long ago. According to Coinbase, users want to learn about Web3, but it’s challenging to move cryptocurrency across networks and manage blockchain bridges and the like.
The crypto exchange has announced its intention to introduce Coinbase Advanced Trade in the near future. This will create a unique Coinbase account that will allow customers to access features and pricing structures from both Pro and Basic accounts.
Following the recent market upheaval, crypto exchanges and marketplaces that wish to invest in crypto for the long term are making adjustments to stay competitive. Coinbase’s latest modifications demonstrate its commitment to offering high-quality services during economic downturns and crypto winters.
