Bitcoin
Financial Market Conflict: Coinbase Launches Oil and Gold Futures, CME Targets Bitcoin Spot Market
(Kitco News) – A potential rivalry between the West Coast and East Coast is brewing in financial markets as two major exchanges infiltrate each other’s excavated routes.
Last week, Coinbase Derivatives, the leading U.S. cryptocurrency derivatives exchange, announced that it would launch retail oil and gold futures contracts on June 3.
“After launching Bitcoin, Ethereum, Bitcoin Cash, Litecoin and Dogecoin futures, we noticed a growing demand for retail-focused products on an accessible and regulated exchange. Therefore, we are excited to extend these benefits to gold and oil futures and provide investors with cross-hedging opportunities across asset classes,” the company said in a press release.
The company said the size of the futures contracts will be based on 10 barrels of oil and 1 troy ounce of gold. Oil futures will trade under the ticker NOL and gold futures will trade under the ticker GLD.
“We believe that offering our participants access to traditional commodity futures like oil and gold, along with cryptocurrencies, is a natural expansion of our product suite. We look forward to seeing the expiration of these contracts and the liquidity they will bring to institutional and retail investors in a regulated manner,” the cryptocurrency exchange said.
Coinbase’s futures announcement came on the same day that the Financial Times reported that CME Group, the world’s leading derivatives market, is in talks to launch a Bitcoin spot market, competing head-to-head with Coinbase.
The crypto spot market would complement CME’s Bitcoin futures contracts, which, with open interest of 31,000 contracts, is one of the largest markets in the world, taking the title from Binance in 2023.
According to the FT article, hosting a BTC spot and futures market would allow traders on the CME to perform what are known as basis trades, a common strategy that involves borrowing money to sell futures while purchasing the underlying asset and extract gains from the small gap between the two.
The FT only spoke to “sources” with direct knowledge of the negotiations and the CME declined to comment on the article.
While Coinbase is the leading crypto exchange in the US, it faces an uphill battle in the broader futures market as CME has a nearly 50-year history with its gold futures.
The London Metal Exchange, the world’s source of base metals, was unable to compete with the CME in the precious metals sector. The LME has closed its July 2022 gold futures due to low trading volume.
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