Crypto exchange behemoth Coinbase made an official announcement on Twitter that it will be adding support for Solana (SOL) and Avalanche (AVAX) perpetual futures contracts. This move comes as Coinbase continues to expand its offering and cater to the growing demand for altcoin trading.
What are Perpetual Futures Contracts?
Perpetual futures contracts are a type of derivative contract that allows traders to speculate on the price movements of an underlying asset indefinitely. They offer several advantages to traders, including opportunities for arbitrage, leveraging, and hedging. However, they also come with disadvantages such as over-leveraging, liquidation risks, and volatility.
Coinbase Advanced, the exchange’s trading platform, initially launched perpetual futures trading in October, offering contracts for Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Ripple (XRP). The addition of Solana and Avalanche perpetual futures contracts further expands the offering for traders on Coinbase.
Advantages and Challenges of Perpetual Futures Trading
Perpetual futures trading has gained popularity in the crypto markets, driving increased demand. According to data on Laevitas, as of November 10, the global centralized exchange (CEX) perpetual volume reached $195.3 billion. Binance, one of Coinbase’s competitors, captured the highest volume, followed by OKX exchange.
Conor Ryder, a research analyst at Kaiko, highlighted that the Bitcoin perpetuals-to-spot-volume ratio is at its highest level in nearly two years. He also noted that these perpetual contracts, often referred to as “perps,” have become hugely popular with traders as they do not expire.
Despite the advantages, it’s important to note that perpetual futures trading carries certain risks. Coinbase acknowledges this by complying with local regulations around crypto derivatives. As a result, perpetual futures trading on Coinbase Advanced is only available to users in specific non-US regions.
Expanding Coinbase’s Altcoin Offering
With the addition of Solana and Avalanche perpetual futures contracts, Coinbase is expanding its altcoin offering and catering to the increasing demand for trading these digital assets. This development provides traders with more opportunities to diversify their portfolios and potentially benefit from the price movements of Solana and Avalanche.
“Coinbase complies with local regulations around crypto derivatives, thus perpetual futures trading on our Advanced Trading platform is only available to users in specific non-US regions,” the exchange notes.
Crypto exchange BitMEX was the first to introduce perpetual contracts in 2016. Since then, these contracts have gained popularity among retail traders, leading to many other exchanges following suit and offering their own perpetual contracts.
As the crypto market continues to evolve, exchanges like Coinbase are adapting to meet the needs of traders. The addition of perpetual futures contracts for Solana and Avalanche is a testament to the growing interest in altcoin trading and the increasing importance of diversification in the crypto space.
