Coinbase Derivatives Exchange FairX Review – How Good Will It Be?

Coinbase Derivatives Exchange FairX Review – How Good Will It Be?
Coinbase Derivatives Exchange FairX Review – How Good Will It Be?
Coinbase Derivatives Exchange FairX Review – How Good Will It Be?
It is regulated
It offers a variety of features and services
Coinbasee users can now freely trade futures and other derivatives

Coinbase is a secure cryptocurrency exchange that allows its users to buy, sell, transfer and store digital currencies. It has a simple interface that makes it easier for new users to transact easily on the exchange. 

Coinbase is mainly known for its spot and margin trading but entered the crypto derivatives market recently after acquiring FairX, a member of the Commodity Futures Trading Commission (CFTC). 

A crypto derivative is a contract between a buyer and a seller for the future price of a digital asset. The two sides enter into a financial agreement to deliberate on the cryptocurrency price on a specific date to achieve enhanced gains compared to buying the underlying asset outright. 

As part of phase one of the contract, the parties agree on a sale/purchase price on a specific day, regardless of the market price. Investing in the currency at a lower price and selling it at a higher price allows for profits from changes in the underlying asset’s value. A common example of crypto derivatives is futures

The acquisition of FairX by Coinbase was one of the first steps in providing crypto derivatives to retail customers in the US and was an essential step toward making the derivatives market accessible to millions of people through an industry-leading, simplistic user interface. 

What is FairX, and what products do they offer? That is what this article will treat.

What is FairX 


FairX is a cryptocurrency exchange announced in June 2021 to provide smaller, more straightforward, more accessible futures for individual investors. It offers an easy-to-understand, straightforward product design that offers lower-cost, right-sized exposure to benchmarks tracking liquid asset classes. Its actions will be regulated as it is a member of the Commodity Futures Trading Commission (CFTC).

By offering crypto derivatives in the U.S., Coinbase could be opening up an entirely new market to U.S. investors. A few exchanges currently offer bitcoin and ether futures to U.S. investors; cash-settled contracts are both the most popular and longest available. CFTC has registered FairX as a designated contract market (DCM), giving it the ability to offer future products in the United States.

It is FairX’s pleasure to offer a futures trading venue that meets the needs of the global retail futures trader through its partnership with many of the industry’s most respected companies. FairX delivers superior products, seamless access, and decreasing exchange costs in order to democratize access to futures and options on futures for active retail traders. 

In addition to TD Ameritrade, E*Trade Financial, Wedbush, ABN AMRO Clearing Chicago LLC, Dorman Trading, ADM Investor Services, Advantage Futures, StoneX, Virtu Financial, and XTX Markets, many firms have committed to offering FairX products at launch. Deutsche Börse Group subsidiary Nodal Clear will provide clearing services. 

Coinbase acquisition plans to create a regulated crypto derivatives exchange


In conjunction with this acquisition, Coinbase plans to offer regulated crypto derivatives, initially through FairX’s existing ecosystem of partners. Through FairX’s infrastructure, Coinbase users in the United States will be able to purchase crypto derivatives. Using simple user interfaces, they expect to make derivatives more accessible to retail investors. This, adding FairX to Coinbase is an essential step in providing millions of Coinbase customers with an industry-leading and simplified derivatives market experience.

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What products does FairX currently offer?


FairX products include Futures on the 

  • Bloomberg US Large Cap Index, which tracks the 500 largest companies in the US 
  • In the Blomberg US dollar spot index, the U.S. dollar is compared against a basket of international currencies.
  • The Supertech Index tracks fifteen of the largest and most actively traded companies in the technology, media, and manufacturing sectors. 

The Bloomberg US Large Cap Index includes—the Nano(B5) and Micro(LB5) Bloomberg US Large Cap Index Futures. Their trading hours are 23 hours between 6 pm -5 pm ET from Sunday to Friday. Their minimum fluctuation price is 0.01 index points equal to $1.00. They list their contracts quarterly ( March, June, September, and December) and are listed for three consecutive quarters. They also allow termination of contracts which can be done at 4 pm ET on the 3rd Thursday of the contract month.

Nano Bloomberg US Large Cap Index Futures – B5 is the Nano product code. This track is modeled after an ETF. This is a simple and easy-to-understand penny stock that offers “bite-sized” exposure to the market. The Nano tracks at a smaller index value of ~23 points.

Micro Bloomberg US Large Cap Index Futures – LB5 is the Micro product code. The Micro track is ten times larger than the Nano track. Its index value is ~2300 points.

Is it Regulated


Yes. The company follows the laws and regulations of every country where it operates. A number of other laws and regulations apply to Coinbase, including those governing consumer protection and financial services.

Also, FairX is a Designated Contract Market (DCM) registered with the CFTC and capable of self-regulation. While the success of Coinbase will be dependent on favorable regulations passing, it aims to become the major player for U.S. retail derivatives trading.

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Conclusion


Coinbase is a popular exchange in the US, known for being one of the largest exchanges by spot trade volume. However, it was only limited to that until it acquired FairX. With that acquisition, it has joined a growing group of crypto companies acquiring derivatives companies to facilitate derivatives trading in regulated countries. Some other companies that have done that are FTX (acquired Ledger X last year), and Crypto.com (acquired Nade X last year).

This is good news for Coinbase users as they can now freely trade futures and other derivatives, opening up the opportunity to have accelerated gains. They should keep in mind, though, that futures trading is riskier than spot trading, with the threat of liquidation looming around every corner. Therefore, if you are in those shoes, remember the Holy Grail of crypto advice – only invest what you can afford to lose.

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CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com

Philipp Traugott

Philipp Traugott

Phil Traugott is a staff writer at CaptainAltcoin. As a trained marketing specialist for copywriting and creative campaigns, he has been advising top companies on the following topics: online marketing, SEO and software branding for more than 10 years. The topic of crypto currencies is becoming increasingly important for companies and investors and he found it very alluring and fitting for his skillset which prompted him to pivot his career towards blockchain and cryptocurrencies.

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