Coinbase CEO Brian Armstrong has hailed the recent approval of U.S. crypto perps as crucial to achieving ‘connected liquidity’ that can drive ‘global network effects.’
In a recent statement, Armstrong said crypto perpetuals (commonly known as perps) are ‘superior products’ that went offshore due to a lack of clear rules for the sector.
According to him, half of the global perps volume (which hit $7 trillion last year) is driven by U.S. users using VPNs to access non-KYC (know your customer) platforms like Hyperliquid. He called it an ‘open secret in the industry.’
With the CFTC approval, however, Armstrong added,
This is important because we’ll now see pooled global liquidity in perpetual futures, with the US and international markets being connected instead of fragmented.
He expects the said liquidity will offer a new chance to build products that can trigger global network effects.
U.S. crypto perps vs. offshore players
Coinbase and Kalshi were the first U.S. platforms to be approved to offer crypto perps in late May by the Commodity Futures Trading Commission (CFTC).
Coinbase CEO’s statement followed a recent update of Kalshi perps hitting $1 billion in record one week after launch.
But whether approved U.S. crypto perps are a threat to Hyperliquid remains highly debated. For some, the 24/7 U.S. crypto firms meant there was no need for Hyperliquid. However, crypto analyst Luke Davis disagreed and noted,
Regulatory arbitrage has a much stronger moat than you’re giving credit, in my opinion. Even if some front-ends eventually add KYC, they will likely still offer higher leverage than tradFi can or list assets faster/that tradFi can’t.
Still, offshore venues strongly dominate perp volumes. In fact, Coinbase International ranked 46th in terms of Open Interest (OI), which tracks capital inflows and opened Futures contracts. Based on 24-hour OI, Hyperliquid was the third-largest derivatives exchange.
However, based on pure perps volume, Coinbase ranked 15th with $10B, while Hyperliquid ranked 14th with $11B, according to Coingecko.
In fact, the top five derivatives exchanges based on OI and volume were all offshore platforms led by Binance, Bybit, and Hyperliquid.
Still, Hyperliquid has increased its market share nearly two weeks after the U.S. crypto perps debuted. According to Hype Flows, Hyperliquid had an 8% dominance of the global perps market, up from 6.8% when the U.S. approved the products.
Overall, Brian Armstrong seems bullish that the recent approval could allow U.S. players like Coinbase to compete with offshore platforms like Hyperliquid and Binance.
It remains to be seen how the competition in the sector will play out amid a rising Hyperliquid moat.
Final Summary
- Coinbase’s Armstrong believes that U.S. players now have a fighting chance to gain market share in the global perps sector.
- Currently, the global perps market is dominated by Binance, Bybit, and Hyperliquid.