Is Large-Scale Institutional Investment Coming to Crypto?

Article source, here.

TL;DR

• Today (Mon 5th June), Coinbase is launching Bitcoin and Ethereum institutional futures contracts.

• The problem for institutional investors is: crypto is historically volatile, regulation isn’t entirely clear, and there’s a simple lack of trust about the space. This may solve those issues.

• If this works out as we hope it does, this could open up the world to institutional crypto investment which is a big part of mass adoption.

Full Story

Coinbase is getting creamed by Blur’s NFT lending protocol, and even Uniswap’s crypto trading volume.

But it doesn’t mean they’ve stopped innovating.

Today (Mon 5th June), they’re launching Bitcoin and Ethereum institutional futures contracts.

Here’s what that means:

‘Futures contracts’ allow traders to buy or sell assets at a predetermined price for a specific date in the future.

For example, say we’re having a bbq in a month and we think the price of burgers is going to increase by then.

We get in touch with a burger supplier and enter into a contract to lock in today’s prices (through a futures contract).

A month later, regardless of the price on that day, we pay for the burgers at the agreed price, and the burger supplier delivers the burgers.

Now, institutions can do a similar thing, through the Coinbase Derivatives Exchange, with BTC and ETH.

Here’s why this is a big deal:

The crypto world has been waiting for institutional investors to jump into the space for years.

The problem for institutional investors is: crypto is historically volatile, regulation isn’t entirely clear, and there’s a simple lack of trust about the space.

Futures contracts solve for the volatility issues in that once they’re set, the price is the price. It’s certainly easier to budget for an investment with a set price than a moving target.

Coinbase’s Derivatives Exchange is regulated by the Commodity Futures Trading Commission (CFTC); meaning this isn’t some ragtag operation, they have strict and clear guidelines to abide by.

When it comes to trust, well, Coinbase is the best we’ve got in the US. They’re the oldest crypto exchange in the US, they have solid proof of reserves and they’re US-based.

(Btw, this isn’t a paid ad, we’re just really excited about the news).

If this works out as we hope it does, this could open up the world to institutional crypto investment which is a big part of mass adoption.

Fingers crossed!