Coinbase’s New Offering and Its Significance
In a recent turn of events, Coinbase Global announced a significant achievement. On August 16th, as reported by Reuters, the company secured the much-anticipated approval to offer cryptocurrency futures to a new market segment: U.S. retail customers. This move is not just a win for Coinbase but also a testament to the evolving landscape of cryptocurrency trading.
Previously, only the institutional clients of Coinbase had the privilege to trade in such products. With this approval, eligible U.S. customers can trade in Bitcoin and ether futures directly. This expansion indicates retail investors’ growing acceptance and trust in cryptocurrency futures.
Market’s Response and Regulatory Involvement
Following this announcement, the market responded positively. Coinbase shares witnessed a 3% surge, settling at $81.55. This uptick in share value directly reflects the market’s confidence in Coinbase’s strategic moves.
The approval came from the National Futures Association (NFA), a self-regulatory organization. The NFA operates under the Commodity Futures Trading Commission (CFTC) designation, ensuring businesses like Coinbase adhere to the set standards and regulations.
Coinbase’s Stance and CEO’s Perspective
Coinbase, in its statement, emphasized its unwavering commitment to operating as a regulated and compliant business. This declaration comes when the company is scrutinized, especially by the Securities and Exchange Commission (SEC); in June, the SEC accused Coinbase of operating without the necessary registration, leading to open criticism from the company.
CEO Brian Armstrong has been vocal about the challenges faced by U.S. crypto companies. He expressed concerns that many might consider moving offshore due to the stringent regulatory environment. Armstrong also pointed out that the enforcement-first approach by SEC Chair Gary Gensler could potentially hinder innovation in the crypto industry.
Exploring the Global Derivatives Market
The approval from the NFA is more than just a win on paper for Coinbase. It opens doors for the company to venture into a largely untapped market. The global derivatives market is colossal, representing almost 80% of the crypto market. Leveraged bets on futures and other derivatives often influence the volatility seen in the broader market.
To put things into perspective, in July alone, the crypto derivatives trading volumes globally reached a staggering $1.85 trillion, as per research firm CCData.
Understanding Cryptocurrency Futures
For those new to the term, cryptocurrency futures are contracts that allow investors to buy or sell cryptocurrencies at a predetermined price on a specified future date. Unlike traditional stock futures, these are based on digital assets, making them a unique investment avenue.
The Importance of Regulatory Approvals
Regulatory approvals play a pivotal role in the crypto industry. Such endorsements ensure the legitimacy of operations and instill confidence among investors. With the volatile nature of cryptocurrencies, regulatory oversight provides a sense of stability and trust.
What are cryptocurrency futures?
Cryptocurrency futures are contracts that allow investors to buy or sell digital currencies at a set price on a future date.
Why is Coinbase’s approval significant?
This approval allows Coinbase to offer cryptocurrency futures to U.S. retail customers, expanding its market reach.
Who approved Coinbase?
The approval was granted by the National Futures Association (NFA) under the designation of the Commodity Futures Trading Commission (CFTC).
What was the SEC’s issue with Coinbase?
In June, the SEC accused Coinbase of operating without the necessary registration as an exchange.
How big is the global derivatives market?
The global derivatives market represents almost 80% of the crypto market. In July, the trading volumes reached approximately $1.85 trillion.