Coinbase is launching its first Nano Bitcoin futures (BIT) on its Derivative Exchange on June 27 to broaden its reach into the crypto derivatives market worth $3 trillion. According to the official statement, the exchange will offer futures at the price of 1/100th the size of a Bitcoin via several leading broker intermediaries.
Coinbase Derivative Exchange, a CFTC-regulated Designated Contract Markets (DCM) futures exchange, is entering the crypto futures market with its first Nano Bitcoin Futures (BIT).
CDE was previously known as FairX until Coinbase announced its acquisition in January 2022 with the aim to give its users more trading options by introducing crypto futures on its platform.
What are crypto futures?
Crypto futures are mainly contracts between two parties to bet on a cryptocurrency’s price at a specific date. Bitcoin futures work the same way. Two investors speculate on a price for the future and set a contract that can be bought or sold.
Suppose a trader buys two Bitcoin futures contracts of 5 bitcoin. The price of a single bitcoin when the futures contract was bought was $1,000 each, which is $10,000 for two Bitcoin futures contracts. The contract will be in progress until the specified date arrives when they can either get a new one or collect it.
About Coinbase Derivative Exchange
FairX is a well-known derivative exchange that gave good figures during its last month of running before the acquisition. Coinbase grabbed the opportunity to rebrand the company to Coinbase Derivative Exchange to launch itself in the crypto futures market, currently worth $3 trillion.
According to the official statement, Coinbase Derivative Exchange is “a world-class team with deep expertise across product development, market structure, compliance, market-leading exchange technology, and a proven ability to deliver listed futures.”
Coinbase is testing its waters into the most successful market by giving retail investors a platform to trade freely at a good price.
Coinbase to launch Nano BIT
Coinbase announced it will release Nano BIT futures, 1/100th of Bitcoin, via various leading broker intermediaries such as EdgeClear, NinjaTrader, Optimus Futures, ADMIS, Advantage Futures, ED&F Man, Ironbeam, and Wedbush.
Coinbase mentioned they are awaiting approval for futures commission merchant (FCM) to offer margin futures contracts directly to their users.
For them, the crypto derivatives market is quite valuable and through Coinbase’s additional product development and accessibility, it might unlock significant growth in the market.
According to the official statement, bitcoin futures “requires less upfront capital than traditional futures products…” which could be valuable for retail investors in the crypto market.
However, many experts believe that crypto derivatives might not be suitable for retail traders unless it’s for wholesale trading. Coinbase believes the 1/100th Bitcoin “creates a real opportunity for significant expansion of retail participation in US regulated crypto futures markets.”
The Nano BIT futures “is one step to creating a robust and regulated crypto derivatives market,” a Coinbase representative told Decrypt.
The crypto exchange is looking for ways to introduce crypto futures benefits so that more and more retail investors can hedge their underlying digital assets by accessing the regulated U.S. crypto derivatives markets.
The launch news has become the talk of town amidst the bear crypto market and Coinbase’s underwhelming performance in its first-quarter report 2022. Many feared an incoming bankruptcy for the exchange but the recent BIT futures launch just shifted the sentiment towards a hopeful direction.
Seeing the $3 trillion worth of crypto futures market, Coinbase’s derivative product might improve its second-quarter performance for 2022.