Coinbase Derivatives Exchange, previously known as FairX, is launching a Nano Ether futures contract this month, hoping to improve the accessibility of the futures market to retail traders.
On June 27, the futures exchange, which is regulated by the Commodity Futures Trading Commission (CFTC), launched Nano Bitcoin futures (BIT). Regulatory approval was then needed for Coinbase to offer these contracts to their clients. This move was expected to unlock significant growth by increasing the accessibility to the crypto market which represented $3T in value at that time.
This launch came in at a time when the crypto market was in a very volatile condition, with the Terra LUNA crash supplementing a market-wide crash. Earlier that year, Coinbase bought FairX to launch their crypto derivatives after receiving the necessary regulatory approval a year prior.
In the last thirty days itself, the Nano Bitcoin futures contract has traded an average of 77,000 contracts per day. Being made available to six brokers through the CFTC-regulated Designated Contract Market
These crypto derivatives are expected to increase retail participation in the crypto space, which suffers from a high entry barrier at times. The Nano Ether contracts are sized at 1/10 that of Ether, requiring a smaller amount to invest than its parent asset. bi
Crypto traders will be able to access the derivatives market with ease and invest in the derivatives of their choice and be able to contribute to the experience of investing in the product more easily.
“While still in its early stage, we believe that product innovation and an accessible entry point for the retail market have contributed to its success. At 1/100th of Bitcoin, our Nano Bitcoin futures contract requires less upfront capital, allowing participants to easily go long or short the price of Bitcoin and manage risk in volatile markets.” read the official blog post.
Users can trade their Nano Ether futures on the following platforms: EdgeClear, Ironbeam, NinjaTrader, Optimus Futures, Stage 5, and Tradovate, and with clearing firms including ABN AMRO, ADMIS, Advantage Futures, Dorman Trading, ED&F Man, Ironbeam and Wedbush.
As soon as the company gets the approval for the license to operate a futures commissions merchant, they’ll be able to provide futures directly to their clients, making the crypto market in the US more efficient.
Will This Increase Retail Participation?
Futures are smaller in size and thus require less capital for upfront investment than traditional crypto products. These can be beneficial for both retail and institutional traders. However, not everyone is convinced that derivatives are a suitable product for retail traders.
Few believe that the futures market invites many risks and criminal activity and therefore should only be restricted to wholesale markets. Few countries have banned the trading of futures for the retail market due to the high risk they present.
However, many large banks offer crypto futures trading. And the availability of Ether futures will only increase retail participation.
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