Coinbase ($COIN) to Acquire Futures Exchange FairX, Can it Beat Other Crypto Exchanges?

Coinbase, the US’s biggest cryptocurrency exchange by trading volume, has announced the acquisition of FairX, a US registered futures exchange. The move will see Coinbase finally filling the gap in its portfolio offering with a move into crypto derivatives.

Coinbase looking to capitalize on the crypto derivatives market with acquisition of FairX

Coinbase exchange is taking a step towards expanding its business. In a recent blog post, Coinbase announced that it has acquired FairX, a derivatives exchange that is registered with the US Commodity Futures Trading Commission (CTFC).

Today, we’re announcing the acquisition of FairX, a CFTC-regulated derivatives exchange or Designated Contract Market, which represents our next step toward creating the robust and holistic trading environment investors are seeking.

Coinbase intends to bring regulated crypto derivatives to their customers with the acquisition. The exchange will do this by leveraging FairX’s existing partners and infrastructure. In its announcement, Coinbase revealed that its main aim for the acquisition is to make the derivatives market more “approachable” for its millions of retail customers.

Coinbase’s move to derivatives means more diversification for the company

The derivatives market is a market for financial instruments like futures contracts or options, which are derived from other forms of assets. Cryptocurrency futures and options let investors hedge their bet by agreeing to buy or sell their crypto at a particular price in the future.

So far Coinbase exchange’s major source of income has been from fees on crypto spot trading. However, the acquisition of FairX, which is set to close within Q1 of this year, is the final push for Coinbase to tap into the highly demanded crypto derivatives market.

This is the most important stepping stone for us to help a derivatives market come to form, Brett Tejpaul, head of Coinbase Institutional, said about the acquisition.

Coinbase has been carrying out other obligations to see it enter the derivatives market smoothly. Last September, the exchange filed an application with the National Futures Association to register as a futures commission merchant. It also acquired Skew, a derivatives tracker, last year.

Crypto derivatives have been in high demand

Crypto derivatives are a hot community in the crypto market, especially in the US that has only a few crypto exchanges that offer it. According to CryptoCompare, trading volume in the derivatives market outperformed the spot market in December, reaching $2.9 trillion.

Coinbase has not been the only US crypto exchange seeking to bring a derivative offering to ripe US crypto economy. FTX.us and Crypto.com are also working towards the goal of becoming regulated crypto futures exchanges in the US. Last year, FTX acquired LedgerX. Similarly, Crypto.com acquired retail derivatives platform Nadex late last year.