Retail investors will be able to trade crypto futures through Coinbase starting Monday, as the largest exchange in the U.S. by volume will offer them on its new Derivatives Exchange platform.
The move comes after Coinbase acquired FairX in January as part of its goal of offering crypto futures and options trading to its customers. FairX had been selling futures products and was already registered with the federal Commodity Futures Trading Commission (CFTC), giving Coinbase a running start in the $3 trillion crypto derivatives market.
Now Coinbase has rebranded FairX as the Coinbase Derivatives Exchange, and its "nano Bitcoin futures"—1/100th of a Bitcoin, marketed under the ticker BIT—is its first listed crypto derivatives product. "This is one step to creating a robust and regulated crypto derivatives market," a Coinbase spokesperson told Decrypt.
If BIT futures were available today, they would be priced around $211, based on a BTC price of $21,000 at the time of writing.
Boris Ilyevsky, Head of Coinbase Derivatives Exchange, said in a statement that FairX brought in 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."
Coupled with Coinbase's consumer-friendly interface, the derivatives exchange aims to make trading of crypto derivatives much more accessible.
Futures are one type of derivative financial product, which set a date and price in the future at which an asset must be sold, regardless of the actual market price at that time. When the SEC finally allowed a Bitcoin ETF in October, it only allowed a Bitcoin futures ETF, not yet a "spot" ETF tied to the current price of Bitcoin.
Many traders prefer futures as they allow for around-the-clock trading, lower upfront investment, "and the ease of going long and short," Ilyevsky said. "Our BIT futures contract will offer the same benefits but is built with the retail trader in mind."
Competing exchange FTX is on a similar path, after acquiring LedgerX in August. Binance also offers derivatives products, but has pulled back in some markets due to regulatory concerns.
It's important to note that BIT futures will not yet be offered directly from Coinbase, but only from third-party retail brokers and clearing firms. Beginning on June 27, Coinbase BIT futures will be available from firms like EdgeClear, Ironbeam, NinjaTrader, Optimus Futures, Stage 5, and Tradovate.
Coinbase cannot offer the futures directly until it gets regulatory approval for its own FCM (futures commission merchant) license.
Although the overall crypto market cap has shrunk considerably in recent weeks, Ilyevsky said increased accessibility and additional product development will "unlock significant growth."
"It's more important than ever to bring the benefits of futures to a broader market," he said, "so that all types of traders can access regulated U.S. crypto derivatives markets to express their views or hedge their underlying crypto assets."