A possible rivalry is developing between the West Coast and East Coast financial markets as two major exchanges start to move into each other’s areas of expertise.
Recently, Coinbase Derivatives, the top U.S. cryptocurrency derivatives exchange, announced that it will introduce small-scale futures contracts for oil and gold on June 3.
After launching futures for Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and Dogecoin, we have seen a growing demand for products focused on retail customers on a regulated and accessible exchange. We are excited to offer these benefits to gold and oil futures, giving investors opportunities to hedge across different asset classes,” said the company in a press release.
The futures contracts will be sized at 10 barrels of oil and 1 troy ounce of gold. Oil futures will trade under the ticker NOL, while gold futures will have the GLD ticker.
We think it’s a natural step to offer futures on traditional commodities like oil and gold along with crypto commodities. We’re excited to see these contracts develop and provide more liquidity for retail and institutional investors in a regulated way,” said the crypto exchange.
Coinbase’s announcement about futures came on the same day that the Financial Times reported CME Group, the top derivatives marketplace in the world, is considering launching a spot Bitcoin market to compete directly with Coinbase.
This spot crypto market would add to CME’s Bitcoin futures contracts, which have an open interest of 31,000 contracts, making it one of the largest markets globally, surpassing Binance in 2023.
According to the FT article, having both spot and futures Bitcoin markets would let CME traders engage in basis trades. This common strategy involves borrowing money to sell futures while buying the underlying asset, profiting from the small difference between the two.
The FT article cited “sources” with direct knowledge, and CME did not comment on the report.
While Coinbase is the leading U.S. crypto exchange, it will face challenges in the broader futures market, where CME has nearly 50 years of experience with gold futures.
The London Metals Exchange, the main source of base metals, couldn’t compete with CME in precious metals and shut down its gold futures in July 2022 due to low trading volume.
