Derivatives Coming to Coinbase After Acquisition of FairX

Coinbase, a major U.S. cryptocurrency exchange with the third largest 24-hour trading volume in the world, has acquired FairX derivatives exchange, intending to enter the derivatives trading market.

FairX is a Designated Contract Market (DCM) derivatives exchange regulated by the Commodity Futures Trading Commission (CFTC). Although FairX is just entering the market, launching in May 2021, it already has brokerage partnerships with industry leaders TD Ameritrade and E*Trade, along with 18 other firms.

Derivatives trading refers to the trading of various exotic products related to the future value of the underlying asset, rather than trading the asset itself.

In a Jan. 13 statement, Coinbase explained its plans to launch crypto derivatives trading for its U.S. customers. “We want to make the derivatives market more accessible to our millions of retail customers,” Coinbase said.

A subsequent tweet from the exchange said that the inclusion of derivatives trading in its product range would ultimately benefit investors on its platform.

"The establishment of a transparent derivatives market will allow retail and institutional investors to further participate in the crypto economy."

Crypto derivatives accounted for a lucrative $137 billion in 24-hour trading volume over the past day, according to data from CoinGecko. This is far higher than the roughly $55 billion in spot volume across all cryptocurrency exchanges during the same period.

Regarding the importance of creating and growing a liquid derivatives market, Coinbase stated: “Developing a transparent derivatives market is a critical inflection point for any asset class.”

Top crypto derivatives exchanges include Binance, FTX, Bybit and OKEx, all of which are also Coinbase competitors in the spot market.

The launch of a regulated crypto derivatives marketplace could quickly rank among the top exchanges in the space for Coinbase, which has 56 million active users, 8.8 million of whom trade at least once a month, according to Business of Apps.

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