Cherokee Acquisition, a US investment company, has begun offering put options to investors to protect their assets against the potential bankruptcy of cryptocurrency exchanges, including Coinbase, Binance and Kraken.
A put option is a forward contract that gives its buyer the right to sell assets at a predetermined price at a predetermined time. If an unfavourable situation arises (forecasts about the upcoming reduction of securities), the trader has the right to sell the contract before the agreed date.
According to Brian Ferrara, trading specialist, these put options will be available to institutional investors and hedge funds.The commission for put options on Coinbase ranges from 0.25% to 0.35%, while Kraken charges a commission of 0.35% to 0.45%. Binance charges the highest commission on the assets at their disposal — from 0.45% to 0.55%. The term of the put option contract is six months, with an option to return up to 100% of frozen assets in the event of an exchange collapse.
This could be very helpful given the recent high-profile scandals around FTX, as well as companies such as Celsius Network, BlockFi and others; in addition, Changpeng Zhao, founder of Binance, warned employees in late 2022 of possible problems with the FTX bankruptcy, causing "many additional inspections and difficult questions" for his own company.
US cryptocurrency exchange Coinbase has decided to reduce 20% of its staff in January 2023. According to CEO Brian Armstrong, this was done on the basis of "information received". It is unclear exactly what confidential information caused such a move, but Coinbase has also suspended the development of projects that are expected to be financially unprofitable.