A potential West Coast/East Coast feud is brewing in financial markets as two major exchanges creep into each other’s carved-out lanes.
Last week, Coinbase Derivatives, the leading U.S. cryptocurrency derivatives exchange, announced it would launch retail-sized futures contracts for oil and gold on June 3.
“After launching Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and Dogecoin futures, we have noticed increasing demand for retail-focused products on an accessible and regulated exchange. Therefore, we are thrilled 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 have the GLD ticker.
“We believe that offering our participants access to futures on traditional commodities like oil and gold, alongside crypto commodities, is a natural expansion of our product suite. We’re eager to see these contracts mature and the liquidity they will bring to retail and institutional investors in a regulated manner,” the crypto exchange said.
Coinbase’s futures announcement came on the same day the Financial Times reported that CME Group, the world’s leading derivatives marketplace, is in talks to launch a spot Bitcoin market, competing head-to-head with Coinbase.
The spot crypto market would complement CME’s Bitcoin futures contracts, which, with an open interest of 31,000 contracts, is one of the largest markets in the world, capturing the title from Binance in 2023.
According to the FT article, hosting both a spot and futures BTC market would allow traders on CME to place what are known as basis trades, a common strategy that involves borrowing money to sell futures while buying the underlying asset, and extracting gains from the small gap between the two.
The FT only talked to “sources” with direct knowledge of the talks, and CME declined to comment on the article.
While Coinbase is the leading crypto exchange in the U.S., it faces an uphill battle in the broader futures market as CME has a nearly 50-year history with its gold futures.
The London Metals Exchange, the world’s source of base metals, couldn’t compete with CME in the precious metals space. The LME closed down its gold futures in July 2022 because of low trading volume.