The permanent futures listing for customers outside of the United States was approved by Bermudan regulators, according to a statement made this week by cryptocurrency exchange Coinbase (COIN).It is not surprising that Coinbase made the decision; in April, in response to a gung-ho approach from American regulators, it obtained a license in Bermuda to run a spot exchange with the eventual goal of launching a permanent futures platform.
Trading leveraged “long” or “short” positions in an underlying asset is possible through perpetual futures, a class of cash-settled derivatives contract.Perpetual swap traders pay a funding rate that equals the difference between the mark and index price of the underlying asset, preventing the contract from expiring every month or every three months. This maintains the efficiency of pricing.The total liquidity and trading volume in the cryptocurrency market have drastically decreased after FTX, the biggest crypto futures platform at the time, collapsed last year.The market is still suffering from the fall almost a year later, and there are still a few exchanges with a lot of the market’s limited liquidity.
The crypto market is presently dominated by Binance in terms of trading volume.For derivatives, however, Binance earned $32 billion in trading volume over the past 24 hours, translating to about $9.6 million in daily revenue from trading fees. Its spot market has seen activity of $6 billion, compared to Coinbase’s $1.2 billion.Coinbase has the ability to keep exceeding revenue projections if it can win some of this market share.According to Kaiko analyst Riyad Carey, Coinbase is “well positioned” to take some of that market share that has been left behind.
“Regarding Coinbase, I do think that it’s well positioned to capture significant market share,” Carey said. “Given Binance’s recent troubles it stands to reason that larger traders and institutions may be skittish to hold significant funds on the exchange. On the other hand, Coinbase is one of the most trusted exchanges, which sets them up nicely.”
On Thursday, the price of Coinbase’s stock increased by 5.09%, indicating that investors are once again upbeat as the Nasdaq-listed exchange adds a new source of income to its repertoire.