Coinbase opens up crypto futures trading to US investors

Eligible US traders can now access crypto futures via Coinbase Financial Markets.

The new launch — revealed Wednesday in a blog post — comes after the company gained clearance in August to operate as a futures commission merchant (FCM) from the National Futures Association.

A futures contract is an agreement to buy or sell an asset at a certain price, and at a specific time in the future.

“Futures provide traders with the ability to hedge their risk, diversify their portfolios, trade with leverage and speculate on which way the market will go — either up or down,” Coinbase Financial Markets CEO Andrew Sears wrote in a Wednesday blog post.

Read more: CME says Q3 open interest for bitcoin, ether derivatives hit all time highs

US traders must use trading platform Coinbase Advanced to access such contracts. They must also have a spot trading account with the exchange.

The contracts are sized with retail traders in mind, according to Coinbase.

“At 1/100th of a bitcoin and 1/10th of Ethereum, these contracts offer lower upfront capital requirements and can be an affordable investment option for a broader range of retail customers,” Sears added.

The global crypto derivatives market represents roughly 75% of global crypto trading volume, according to Coinbase.

The Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) first offered bitcoin futures contracts in December 2017. CME launched ether futures contracts in February 2021.

CME is behind only Binance in terms of bitcoin futures open interest, according to Coinglass data.

CME is about to flip Binance as the largest exchange with respect to Bitcoin futures open interest. Institutions are here… and it’s just getting started. The physical markets will catch up. pic.twitter.com/uPY0HRsoso

— Gabor Gurbacs (@gaborgurbacs) October 30, 2023

Analysts have said Coinbase’s US derivatives push could aid the company longer-term as it seeks to build more revenue streams to supplement declining spot trading volumes.

“While we don’t expect to see material revenues from [Coinbase] derivatives offering in the near-term given the generally low liquidity in the capital markets and the fact that the platform is just now being launched, we believe that over time, it will allow [Coinbase] to become the premier futures offering for both retail and institutional traders in the US,” Compass Point Research and Trading analysts said in a September research note.

Owen Lau, executive director at Oppenheimer & Co., said US derivatives — along with efforts such as international expansion and its layer-2 network Base — “could gradually add more incremental revenue outside spot trading” for Coinbase.

The launch comes as Coinbase remains in a legal battle with the US Securities and Exchange Commission. The regulator sued the company in June for allegedly operating as an unregistered exchange — a charge Coinbase has refuted.

Coinbase International Exchange launched perpetual futures trading in May for non-US institutional investors — extending that to retail users outside the US in September.

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