Coinbase and Cboe Digital To Offer Derivatives

Valued at $196 billion, the cryptocurrency derivative market outpaces all others in the sector. Derivatives, which offer investors the ability to leverage their positions for potentially larger gains, also provides advanced risk management strategies that appeal to sophisticated institutional traders.

However, regulations make crypto derivatives trading very hard to do in the US. There really isn’t any place to go if you’re a US citizen who wants to trade crypto derivatives.

But perhaps that is beginning to change with the additions of the Coinbase Derivatives Exchange and Cboe.

Coinbase Derivatives Exchange

Coinbase Derivatives Exchange is the derivatives arm of Coinbase, but up to now, all they’ve been able to offer customers are Bitcoin micro-futures, which are Bitcoin derivatives contracts sized at 1/100th of a Bitcoin. It’s a start, but it’s not what investors really want.

Full-sized contracts are what investors want, and that is what Coinbase is now giving them with its new futures programs. This, much more to their liking, will enable institutional investors to trade contracts up to 1 BTC and 10 ETH.

Cboe Digital

Cboe Global Markets is probably not a company you’ve heard of before, but it might be one you hear a lot about in the future. That’s because their crypto exchange Cboe Digital has just gained approval from the CFTC to offer margined futures contracts for Bitcoin and Ether.

And, unlike Coinbase, you don’t need to be an institution to participate.

Combine this move with the fact that Cboe Digital also offers spot trading, and there very well could be another exchange contender emerging before our eyes.

Why Should I Care?

There's a high likelihood that many of you may never venture into trading crypto derivatives, and that's understandable. While derivatives can pave the way for significant gains, they can also lead to substantial losses.

For most, it's advisable to tread cautiously and keep a safe distance.

However, even if you choose to stay clear of derivatives, their introduction in the US has broader implications that are beneficial to all. Derivatives attract institutional investors, who bring substantial capital. This influx of capital can help bolster prices while improving liquidity, making trading smoother and more efficient. This influx of liquidity is particularly needed in the crypto space after trading firms like Jane Street and Jump scaled back their crypto operations.