Coinbase Rolls Out First Crypto Derivative Amid Slump in Tokens

Coinbase Global Inc. will launch its first crypto derivative product on Monday in the midst of the current crypto winter. Each nano Bitcoin futures contracts (BIT) will represent 1/100th of the token, the biggest US cryptocurrency exchange said in a statement Thursday. The contracts will be accessible for trading only via multiple third-party retail brokers and clearing firms including ABN AMRO and Wedbush. 

Coinbase is tapping into the derivatives space after announcing earlier this month it will lay off 18% of its workforce amid worsening market conditions. Futures and options -- which let investors hedge their bets by agreeing to buy or sell coins on a certain day at a certain price -- have long been a glaring hole in its product portfolio. The bulk of Coinbase’s sales comes from spot trading, which has dropped precipitously this year. 

Coin prices have been falling since bellwether Bitcoin hit its all-time high in November, and fell sharply in the last few weeks, due to liquidity issues at lender Celsius Network, hedge fund Three Arrows Capital and related fallout at other funds and apps. Bitcoin is down 29% in the last month, per tracker CoinMarketCap. Coinbase’s shares are down almost 77% so far this year, according to Bloomberg data.

“At 1/100th of the size of a Bitcoin, it requires less upfront capital than traditional futures products and creates a real opportunity for significant expansion of retail participation in US regulated crypto futures markets,” Boris Ilyevsky, head of Coinbase Derivatives Exchange, said in the statement. 

The futures will be launched via Coinbase Derivatives Exchange, the result of the recently acquisition of futures exchange FairX, the company said. Coinbase Financial Markets is still awaiting for approval for its license to operate a futures commission merchant to offer futures directly to clients.