Coinbase Advanced trading activity surges in 2024

Derivatives trading products saw rapid growth, suggesting that professional traders were actively seeking exposure to cryptocurrencies.

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Crypto Spot Volumes on Centralized Exchanges Hit Lowest Since March 2019

The volume of cryptocurrency spot trading on centralized exchanges (CEXs) plunged by 21.8% in May to $495 billion, marking the lowest monthly trading volume since March 2019. Also, derivatives trading volumes slumped by 15.7% to $1.95 trillion, which is the lowest since December 2022.

Crypto Derivatives Market Share Hits Peak

These figures are according to new data by digital asset data provider, CCData, previously known as CryptoCompare. CCData is also a benchmark administrator authorized by the UK Financial Conduct Authority.

According to the firm, despite the decrease in derivatives trading volumes on CEXs, the market share of the segment reached an all-time-high last month, expanding to 79.8%. However, the volume of spot and derivatives trading combined slid by 15.7% to $2.41 trillion.

CCData explained that the volume represents the second consecutive drop in monthly volume of the combined activities. The decrease came as the prices of digital assets fluctuated within a relatively narrow range during the period.

“The popularity of meme coins traded on decentralized venues has also contributed to the declining trading activity on centralized exchanges,” CCData added.

Binance Shrinks, CME Grows

Giving more details on the cryptocurrency trading market, CCData noted that spot trading on Binance, the world’s largest cryptocurrency exchange by trading volume, nosedived by 26% to $221 billion in May. In addition, Binance’s spot market share shrank for the third consecutive month, slipping to 43%.

The data analytics firm attributed Binance's continued weakness to the halting of zero-free trading for stablecoin USDT pairs, general weakness in the market and increased scrutiny from regulators.

Finance Magnates reported that cryptocurrency exchanges in the United States continue to face regulatory crackdown, with Binance and Coinbase sued this week by federal securities regulator for allegedly operating illegal exchanges and offering unregistered crypto asset securities.

Meanwhile, CCData’s data shows that Chicago Mercantile Exchange (CME) remained resilient in the face of plummeting volumes in the crypto derivatives industry. The top derivatives exchange posted a marginal growth of 0.53% in its derivatives volume, with total trades worth $39.1 billion.

“CME's resilience can be attributed to continued institutional interest in Bitcoin, as demonstrated by a 10.5% surge in BTC futures volume to $29.5bn,” CCData noted.

Moreover, CCData also shows that Uniswap, the biggest decentralized crypto exchange in the world, continued to outperform all CEXs, with the exception of Binance, for the fourth consecutive month. This is despite the fact that the exchange’s volume fell by 11.6% to $33 billion last month.

Uniswap functions as a non-custodial exchange that enables users to trade Ethereum blockchain-based ERC-20 tokens directly with each other without the need for a third party.

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Coinbase Derivatives Exchange Launches Bitcoin and Ether Futures

Coinbase Derivatives Exchange, a derivatives platform linked to its namesake cryptocurrency exchange, will introduce Bitcoin and Ether futures contracts for institutional clients on June 5. Coinbase Bitcoin (BTI) and Coinbase Ether (ETI) futures contracts, sized 1 Bitcoin and 10 Ether per contract, respectively, will be accessible through third-party institutional Futures Commission Merchants (FCMs) and brokers, the company announced on Friday.

Coinbase added that it has witnessed increased demand for futures contracts among investors. Futures contracts are agreements that allow investors to buy or sell an asset at a predetermined price at a specific future time.

"With the launch of these institutional-sized USD–settled contracts, we look to empower institutional participants with greater precision in managing crypto exposure, expressing directional views, or tracking BTC and Ether returns in a capital-efficient manner," the exchange said.

Coinbase’s Global Crypto Derivatives Exchange

Early May, Coinbase launched a global cryptocurrency derivatives exchange targeting institutional clients based outside the US. Afterwards, the new platform listed Bitcoin and Ether perpetual futures contracts, with trades settled in stablecoin USD Coin. Unlike futures contracts, perpetual futures contracts do not have a specific expiry data.

The launch of the derivatives exchange follows Coinbase's acquisition of a regulatory license for digital asset exchange services, including token sale and issuance, in Bermuda. The step came after the publicly listed crypto company hinted at leaving the US due to regulatory concerns.

Struggles with the Regulators

In March, Coinbase received a Wells Notice from the Securities and Exchange Commision (SEC). The notice stated that the Nasdaq-listed company was breaching the US securities regulations by offering unregistered securities.

Additionally, the notice pointed out that the SEC could press further actions against the exchange, including an injunction or a cease-and-desist order. Responding to the SEC's notice, Coinbase's CEO Brian Armstrong faulted the agency for failing to provide proper regulations to the industry.

Nonetheless, the company is expanding its products offering, most recently launching a zero-fee subscription model that lets users trade crypto at no fee with incentives of higher rewards. Dubbed Coinbase One, the service launched in 2021 in the US under a beta program and opened to users in the UK, Germany, and Ireland.

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