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Will Coinbase Be Able To Elevate The “Futures” Of Retail Investors In The Crypto Market?

By TD NewsDesk

TD NewsDesk

Updated on Tue, Aug 22, 2023

Overall Rating
Cry! Cryptic! Crypto!

Three words that describe the emotional, legal and financial rollercoaster observed in the cryptocurrency market in the last few months.

From the highs and lows to the rises and falls in values, along with the emergence and disappearances of crypto-based firms, it’s been an up-and-down few months for the crypto industry. Read more here!

Well, the latest news brings some hope, courtesy of Coinbase Global AKA Coinbase, the largest cryptocurrency exchange in the US.

So, what’s the new hope? Let’s explore:
 

What’s New With Coinbase?

 
  • According to an announcement on Coinbase’s website, the company secured regulatory approval from the National Futures Association (NFA), a CFTC-designated (Commodity Futures Trading Commission) self-regulatory organization, to operate a Futures Commission Merchant (FCM) and offer eligible US customers access to crypto futures.

  • Essentially, Coinbase can offer Bitcoin and Ethereum futures to eligible US customers directly, as opposed to being able to offer them to institutional clients only.

  • The shares of the firm even climbed 3% after the approval, which came almost two years after its application was filed.

  • An excerpt from the announcement reads as, “This is a critical milestone that reaffirms our commitment to operate a regulated and compliant business and to provide the most trusted and secure crypto-native offerings. Coinbase Financial Markets will now be the first crypto-native leader to offer access to regulated, leveraged and cash-settled crypto futures.”

  • This is a big win for the firm that’s running legal battles against the Securities and Exchange Commission (SEC).

  • For clarity's sake, ‘options’ means traders can trade a certain cryptocurrency by making use of future price targets and specified with the option to opt-out before the expiry date of the contract. ‘Futures’ means the buyer is obliged to purchase them at the specified future date for a pre-set price.

   

Why Is The Industry Abuzz With This News?

 
  • In addition to institutional traders, retail traders will be able to trade in cryptocurrency futures. This will allow retail customers to indulge in the crypto market without having to break the bank to invest.

  • The biggest hope is that this move would help reignite a sputtering cryptocurrency market, especially for the shrinking $2 trillion cryptocurrency derivatives market, which has been receding due to economic uncertainty, regulatory issues and low volatility leading to small investor bets.

  • According to Coinbase, “The global crypto derivatives market represents ~75% of crypto trading volume worldwide and is a critical trader access point.”

  • At present, retail traders can trade options only through brokers on the CME (Chicago Mercantile Exchange) or invest in bitcoin exchange-traded funds (ETFs) issued by fund managers. This is where Coinbase’s approval is making noise, giving retail traders the chance to change things in the crypto world.

  • Lucas Kiely, Chief Investment Officer of Yield App, believes that "Coinbase’s approval to offer U.S. futures has the potential to rekindle hope and momentum in the market."

  • However, according to Todd Groth, Head of Index Research at CoinDesk Indices, it might be too early to believe that this could have a big impact, even saying, "It remains to be seen how Coinbase structures these products."

 
In other news affecting Coinbase (or Coinbase affecting the market), the firm is reportedly collaborating with Circle, a crypto exchange, with which it had previously launched the stablecoin, USD Coin. Now, the two will take over governance and operations of the USD Coin tokens, which was handled by the Centre Consortium.

As explained by Jeremy Allaire, Co-founder and CEO of Circle, “Circle and Coinbase […] have agreed that with growing regulatory clarity for stablecoins in the U.S. and around the world, the requirement of a separate governance body like Centre, is no longer needed.”

As we said at the start, the cryptocurrency world is going through various ups and downs and Coinbase is at the center of two “ups” in the last few days itself.

Do you think these moves will give Coinbase a head start of the bull run in the cryptocurrency market? Will its competitors make moves to stay relevant in crypto circles?

Let us know in the comments below!

First published on Tue, Aug 22, 2023

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Crypto CurrencyBlockchain Crypto Derivatives Trading Futures Options Stock Coinbase Exchange

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