Major U.S. crypto exchange Coinbase, the third largest in the world by 24 hour volume, intends to enter the derivatives trading markets, having acquired the FairX derivatives exchange.
FairX is a Designated Contract Market (DCM) derivatives exchange regulated by the Commodity Futures Trading Commission (CFTC). Despite being relatively new to the market, having launched in May 2021, FairX has secured brokerage partnerships with industry leaders TD Ameritrade and E*Trade, along with 18 others.
Derivatives trading refers to the trading of various exotic products linked to the future value of underlying assets, rather than trading the assets themselves.
In a Jan. 13 announcement, Coinbase explained plans to roll out crypto derivatives trading for its customers in the U.S. Coinbase stated, “We want to make the derivatives market more approachable for our millions of retail customers.”
A subsequent tweet from the exchange said that adding derivatives trading to its suite of products would ultimately benefit investors on its platform.
“The creation of a transparent derivatives market will unlock further participation in the crypto economy for retail and institutional investors alike.”
Crypto derivatives account for a lucrative $137 billion in 24 hour trading volume over the past day according to CoinGecko. This puts it far above the roughly $55 billion in spot trading volume across crypto exchanges in the same period.
Regarding the importance of creating and nurturing liquid derivatives markets, Coinbase said, “The development of a transparent derivatives market is a critical inflection point for any asset class.”
Top crypto derivatives exchanges include Binance, FTX, Bybit, and OKEx, all of which are also competitors with Coinbase on spot markets.
Coinbase launching regulated crypto derivatives markets would likely slingshot it immediately into the top exchanges in that category as it has 56 million active users, 8.8 million of whom make at least one trade per month according to BusinessofApps.