The recent approval by U.S. regulators allows Coinbase Financial Markets (CFM) to offer regulated leveraged crypto futures to retail investors. This move positions Coinbase, the largest compliant crypto exchange in the U.S., to provide cryptocurrency futures trading—including Bitcoin contracts—to general users.
October marked a noticeable回暖 (rebound) in the crypto market. In the derivatives sector, Bitcoin futures open interest surged by 27.1%, while Ethereum futures open interest increased by 6.1%. Trading volume for Bitcoin futures rose by 59.5% to $768 billion.
With the Federal Reserve slowing its pace of interest rate hikes and potential rate cuts on the horizon, the derivatives market holds significant investment potential for the coming year. Additionally, if international geopolitical tensions continue to escalate, derivatives could see increased use as risk-hedging tools. Traders utilizing options and other instruments for arbitrage may find themselves at a advantage.
How Is the Derivatives Trading Market Evolving?
The first cryptocurrency derivatives emerged in 2011, though they were limited to Bitcoin-based futures contracts. Over the years, exchanges expanded their offerings, allowing investors to hedge against market volatility and profit from future price movements. By 2020, the crypto derivatives market had exploded to record highs.
As of May 2020, the spot cryptocurrency market recorded a 24-hour trading volume of $200 billion, while the derivatives market reached approximately $320 billion—about 60% higher. Many experts predicted that derivatives trading would continue to outpace spot trading as more institutional investors sought to hedge exposure to major cryptocurrencies like Bitcoin.
This prediction has held true. According to CoinGecko data, as of March 2023, derivatives dominated the crypto market, accounting for 74.8% of the total trading volume of $2.95 trillion. Meanwhile, centralized (CEX) and decentralized (DEX) spot exchanges accounted for only 22.8% and 2.4%, respectively. March marked the peak of derivatives' dominance over the previous six months.
In August, Coinbase highlighted that the global crypto derivatives market represents about 75% of all crypto trading volume, making it a critical access point for traders.
Before diving into derivative products, identifying key trading platforms is essential. Flipster, a crypto derivatives exchange, has reimagined the futures trading experience with a mobile-first approach. It targets retail crypto traders with derivatives experience, aiming to reduce technical barriers and let users focus on trading.
Mobile Exchanges: Bridging the Gap for Retail Traders
Founded in 2021, Flipster has grown into an all-in-one platform offering over 120 assets with leverage of up to 100x. It regularly adds new perpetual contracts, distinguishing itself by listing tokens not typically available for futures trading on other exchanges.
As the first crypto exchange incubated by the founders of Presto Labs, Flipster continuously expands its perpetual contracts offerings.
Perpetual contracts lack an expiration date, necessitating a price anchoring mechanism called funding rate. If the perpetual contract price exceeds the spot price, long buyers pay funding fees to short sellers. The reverse occurs when the perpetual contract trades below the market price of the underlying asset.
Flipster incorporates a margin mechanism that directly influences traders' risk tolerance and strategies. For example, if a trader buys 0.1 BTCUSDT perpetual contract at a market price of $30,000 using 10x leverage, the initial margin is set at 10% of the nominal value, while the maintenance margin is 0.5%. Thus, the position's nominal value is $3,000, with an initial margin of $300.
Here, the trader collateralizes $300 to hold a long position worth $3,000. If the perpetual contract price rises from $30,000 to $36,000, the initial margin remains $300, but the unrealized profit becomes $600, and the remaining margin reaches $900. While the mark price increased by 20%, the margin grew by 200%, demonstrating how Flipster's margin mechanism amplifies trader profits in leveraged positions.
Presto Labs, established in 2014 in Singapore, is a global quantitative trading firm and the driving force behind Flipster. The team comprises researchers, engineers, and financial experts with extensive实战 (practical) experience in finance.
Before founding Presto Labs, CEO Yongjin Kim worked as a quantitative trader at Jump Trading after graduating from MIT, specializing in mathematics and computer science. COO Yongwoon Cho was a software engineer at Google, developing tools to analyze Korean syntax and improve translation between Korean and English. CTO Jaewon An, also a former Google software engineer, created software for automatically mapping road topology and hierarchies. He won a gold medal in the Korean Informatics Olympiad and competed in the International Collegiate Programming Contest (ICPC) World Finals.
The trio launched Presto Labs in 2014 using entirely self-funded capital. To this day, the company has not accepted any external investment. Through strategic growth, Presto Labs has become a top global crypto trading firm over eight years. The team now includes around 200 members, executing about 100 million orders weekly, with monthly trading volumes averaging $30–40 billion and annual trading exceeding $700 billion.
Amid the current market downturn, many major exchanges are pivoting. As investment temporarily shifts from crypto to AI, the crypto market is seeking innovative growth strategies beyond speculation.
Flipster CEO Yongjin Kim states:
Our team has worked hard to turn this new vision for futures trading into reality. We aren’t just copying what other exchanges are doing; we’re creating something novel. I believe the market is ready for fresh ideas.
Frequently Asked Questions
What are cryptocurrency derivatives?
Cryptocurrency derivatives are financial contracts whose value is derived from underlying crypto assets. They include futures, options, and perpetual contracts, allowing traders to speculate on price movements or hedge against risks without owning the actual assets.
Why is the derivatives market dominated by leveraged trading?
Leveraged trading amplifies potential gains (and losses), making it attractive for traders seeking higher returns from market volatility. Derivatives exchanges offer leverage up to 100x, enabling significant exposure with minimal capital.
How do perpetual contracts work?
Perpetual contracts mimic traditional futures but lack an expiry date. They use a funding rate mechanism to align contract prices with spot prices. Traders holding long or short positions may pay or receive funding fees periodically based on market conditions.
What should retail traders consider before trading derivatives?
Retail traders should understand leverage risks, margin requirements, and market volatility. It’s crucial to use risk management tools, start with lower leverage, and choose reputable platforms with robust security and liquidity.
Can derivatives be used for hedging?
Yes, derivatives are effective hedging tools. Traders can use options or futures to protect portfolios against adverse price movements. For example, buying put options can offset potential losses in a declining market.
How do mobile exchanges benefit retail traders?
Mobile exchanges offer convenience, real-time alerts, and user-friendly interfaces. They allow retail traders to access markets anytime, execute trades quickly, and manage portfolios on the go, making derivatives trading more accessible. 👉 Explore advanced trading strategies
Disclaimer: This article is provided for informational purposes only and does not constitute investment advice. Readers should conduct their own careful assessment before engaging in any financial activities.