Mom-and-pop bitcoin enthusiasts in America now have access to a brand-new derivatives playground that cryptocurrency specialists believe could revitalize a dormant sector. Coinbase Global (COIN.O), a cryptocurrency exchange, is their new platform, and on August 16 it became the first company with a concentration on cryptocurrencies to receive approval to provide cryptocurrency futures to American retail consumers.
It’s still early. However, the first regulated and listed cryptocurrency company to provide futures trading to American public investors has the potential to resurrect the $2 trillion bitcoin derivatives market, which is now on the decline.
According to Lucas Kiely, chief investment officer of digital investment platform Yield App, “Coinbase’s approval to offer U.S. futures has the potential to rekindle hope and momentum in the market.”
In a market where bitcoin has been stagnating for months due to unfavorable central bank policies around the world and issues with cryptocurrency exchanges like FTX and Binance, momentum and hope are in short supply.
Coinbase’s announcement also comes at a time when trading volumes in derivatives have dramatically decreased as a result of persistent regulatory barriers, low volatility, and economic insecurity that has discouraged investors from placing large wagers.
On authorized exchanges like Bitstamp and Coinbase, retail traders in the US can directly trade bitcoin. On the CME, they can trade options, but only through a broker. Alternatively, they could invest in exchange-traded funds (ETFs) for Bitcoin offered by fund managers like ProShares and VanEck.
That is why there is excitement around Coinbase’s new product. A surge of retail traders, known for their hysterical meme-stock trading sparked on social media platforms like Reddit, might alter the cryptocurrency landscape.
According to Todd Groth, head of index research at CoinDesk Indices, it is still too early to determine the launch’s impact. It’s still unclear how Coinbase will arrange these goods, he added.
Since these products debuted in 2014, derivatives like options and futures have dominated the trading of cryptocurrencies as investors seized the chance to make wagers on Bitcoin’s price movements with small initial investments.
The predominance of options trading, where investors place extremely leveraged bets that potentially pay out for both gains and losses, is sometimes mentioned as the cause of cryptocurrencies’ infamous volatility.
However, futures trading volumes fell by about 13% in July to $1.85 trillion, the lowest monthly volume since December 2022 and the second-lowest volume since 2021, according to research firm CCData.
Despite a decline in overall volumes in the second quarter of 2023, derivatives volume was six times more than spot volume, according to Kaiko Research.
According to CCData, spot cryptocurrency trading volumes decreased 10.5% to $515 billion during the same time frame.
