TL;DR
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Today (Monday, June 5) is Coinbase launch Bitcoin and Ethereum institutional futures contracts.
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The problem for institutional investors is: crypto is historically volatile, regulation is not entirely clear, and there is a simple lack of confidence in the space. This can solve those problems.
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If this works as we hope, it could open up the world to institutional crypto investment, which is a big part of mass adoption.
Full story
Coinbase is skimmed by Blur’s NFT lending protocol and even Uniswap’s crypto trading volume.
But that doesn’t mean they’ve stopped innovating.
Today (Monday 5 June) they are launch Bitcoin and Ethereum institutional futures contracts.
Here’s what that means:
Futures contracts allow traders to buy or sell assets at a predetermined price for a specific date in the future.
Let’s say we have a barbecue in a month and we think the price of burgers will go up by then.
We contact a burger supplier and enter into a contract to fix today’s prices (via a forward contract).
A month later, regardless of the price on that day, we pay the burgers at the agreed price, and the burger supplier delivers the burgers.
Now institutions can do something similar, through the Coinbase Derivatives Exchange, with BTC and ETH.
Here’s why this is a big deal:
The crypto world has been waiting for years for institutional investors to jump into the space.
The problem for institutional investors is: crypto is historically volatile, regulation is not entirely clear, and there is a simple lack of confidence in the space.
Futures contracts solve the volatility problems because, once established, the price is the price. It’s certainly easier to budget for a fixed-price investment than a moving target.
Coinbase’s derivatives exchange is regulated by the Commodity Futures Trading Commission (CFTC); meaning this is not a ragtag operation, they have strict and clear guidelines they must adhere to.
When it comes to trust, Coinbase is the best we have in the US. They are the oldest crypto exchange in the US, they have solid proof of reserves and they are US based.
(By the way, this isn’t a paid ad, we’re just really excited about the news).
If this works as we hope, it could open up the world to institutional crypto investment, which is a big part of mass adoption.
Fingers crossed!