“Over time we plan to leverage FairX’s infrastructure to offer crypto derivatives to all Coinbase customers in the US,” it wrote, on the matter.
FairX might not exactly be a household name, but it does have a huge selling point: It’s already regulated by the U.S. Commodity Futures Trading Commission (CFTC). The CFTC has oversights of the derivatives markets for all kinds of things that stem even beyond commodities. Derivatives act as contracts based on another asset that enables people to trade (buy or sell) that asset (or of course, the cash equivalent of that asset) if it gets to a certain price.
Futures contracts lock a commitment in place, and options contracts give to buyers or sellers the choice of seeing the trade through.
Derivatives come in handy for hedging investments. They also prove useful for plain betting n future prices. A report made recently from Arcane Research discovered that speculators were largely turning into leveraged trades (which is borrowing from a platform to bet more than they put down) in derivatives markets come the turn of the new year.
According to Coinbase the FairX acquisition will help “make the derivatives market more approachable” to its customer base. The acquisition is expected to be finalized by the end of March.
“These products are in high demand from investors who seek to effectively manage risk, execute complex trading strategies, and gain exposure to crypto outside of existing spot markets,” they wrote.
This isn’t the only U.S. based exchange to make a play like this into derivatives. Back in August, FTX.US, which serves as the American affiliate of Sam Bankman-Fried’s global exchange, proceeded with plans to buy LedgerX. LedgerX is another derivatives trading platform, and is regulated by the CFTC.
Furthermore, just last month Crypto.com revealed the purchase of North American Derivatives Exchange, which would give it an entry point into the U.S. crypto derivatives market.