- The valuation of the BIT futures will be based on a Bitcoin price.
- The platform will allow retail investors to trade crypto futures through the new Derivatives Exchange platform.
- The crypto derivatives market is valued at $3 trillion.
The Coinbase Derivatives Exchange, formally called FairX, will launch Nano bitcoin futures for third-party brokers.
The futures will be priced at 1/100th of a bitcoin’s value starting this Monday.
Coinbase is the largest US-based exchange platform by volume that addresses the interests of retail investors.
The platform will allow retail investors to trade crypto futures through the new Derivatives Exchange platform.
How will it play out?
Coinbase acquired FairX in January as part of its objective of developing more products for investors in the crypto market. FairX had been offering futures products to retail investors and was a major competitor in the futures trading sector.
The company was already registered with the Commodity Futures Trading Commission (CFTC). The commission is a regulatory authority that monitors and regulates platforms dealing in futures trading.
The crypto derivatives market which is valued at $3 trillion is set to benefit from the move made by Coinbase. After acquiring FairX, Coinbase rebranded the futures trading exchange to the Coinbase Derivatives Exchange.
The Nano bitcoin futures, which are marketed under the ticker BIT are the platform’s first crypto derivatives product. It is estimated that if BIT futures were available today, they would be valued at around $211.
The valuation of the BIT futures would be based on a Bitcoin price of $21,000 as per the time of writing this article. The head of Coinbase derivatives exchange, Boris Ilyevsky said that FairX was composed of a world-class team.
He elaborated that the team was very effective in product development, market structure, compliance and market exchange technology. Integrating the FairX expertise with the Coinbase consumer-friendly interface will enable the derivatives exchange to deliver the listed futures.
The integration will inadvertently make crypto derivatives much more accessible to retail investors in the Coinbase exchange.
Coinbase competitors in futures trading
Futures are derivatives exchange products that set a price and a date in the future at which an asset must be sold. The set price of the asset is a standalone price that is not affected by the changes in the market price.
In October 2021, SEC allowed Bitcoin futures ETF but insisted that the ETF was not yet tied to the current price of bitcoin at the time. Many retail investors prefer futures due to their low upfront investment and their all-around-the-clock trading structure.
Ilyersky insisted that the BIT Futures contract will offer the same benefits and will be built with the retail trader in mind. Other exchanges such as Binance and FTX are slowly catching up to the Futures trading trend.
FTX acquired LedgerX in August while Binance now offers derivatives products, despite regulatory concerns in some markets. Coinbase representatives said that the BIT futures will not be offered directly from the exchange platform.
The futures will be offered from third-party sources including clearing firms and retail brokers. Coinbase BIT Futures will be available on EdgeClear, Ironbeam, NinjaTrader, OptimusFutures, Stage5 and Tradovate as of June 27.
Upon regulatory approval from the Futures Commission Merchant (FCM), Coinbase will offer direct trading of futures in their exchange platform.
