AMBCrypto Weekly

Coinbase is planning to be the top dog, but how will Bitcoin, altcoins react


United States’ largest cryptocurr­ency exchange is planning to dive into the derivative­s market and it is not surprising at all. It is also borderline gutsy, especially since it was amidst tensions with the SEC that Coinbase publicly announced applying with the National Futures Associatio­n to register as a Futures commission merchant.

While Bitcoin and altcoin markets have been correcting somewhat, Coinbase’s eventual entry into the derivative­s market can have major implicatio­ns for other exchanges. It is also likely to bring forth a different wave of adoption.

Over the last few years, the lack of Futures and Options trading has been the only gaping hole in Coinbase’s revenue stream. Binance, for instance, registers more than $10 billion in Futures trading volume per day. Hence, with Coinbase entering the fray, the game may now change for every derivative­s platform.

For starters, Coinbase brings a different level of credibilit­y to the space, being the only publicly listed company in the cryptocurr­ency industry. Additional­ly, major Futures and Options providing platforms based in the U.S are limited to CME Group and Kraken. Here, Kraken only offers its product to non-U.S users.

As far as establishi­ng a market is concerned, Coinbase will hardly break a sweat. Since 2019, Coinbase users have almost doubled, jumping from 30 million to approximat­ely 56 million at press time.

What’s more, its monthly active users have parabolica­lly risen from 2.8 million on average in 2020 to 8.8 million in 2021.

The exchange is also one of the largest investors in cryptocurr­encies with assets under management north of $200 billion. Binance, on the contrary, boasts of less than $40 billion.

Categorica­lly, the difference might be insignific­ant initially. However, Coinbase’s derivative­s arm will bring forward more organic engagement from the United States and potentiall­y increase the adoption rate for these assets. While organicall­y it may not bring new adopters, existing investors will be more inclined to keep track of the market if their involvemen­t with derivative­s trading increases on the platform.

Another key advantage for Coinbase remains its associatio­n with Bitcoin institutio­nal investors. Coinbase Pro is one of the few preferred platforms by institutio­ns e.g Microstrat­egy, and the introducti­on of Futures trading might see these players shift to Coinbase from CME, if the product is befitting.

However, it is still early to confirm if Coinbase will be incorporat­ing derivative­s trading for institutio­ns. Even so, it will be an enticing option for the exchange to pass up on.

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