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CME’s Bitcoin Spot Trading Plan
Wall Street’s Increasing Interest in Digital Assets
Advantages of CME Bitcoin Spot Trading
Financial Institutions Embrace Bitcoin
Institutional Investment Floods into Bitcoin
CME’s Dominant Position in the Bitcoin Futures Market
EBS Currency Trading Platform and Regulatory Challenges
Industry Skepticism and Expectations
Financial Times Report
The world’s largest futures exchange, CME Group, is preparing to launch Bitcoin spot trading. This move aims to capture the growing demand from Wall Street fund managers in the cryptocurrency field. According to internal sources, the Chicago-based company is in discussions with traders interested in buying and selling Bitcoin in regulated markets.
This plan is still under consideration and represents a significant step for major Wall Street institutions entering the digital asset space. Previously, the US Securities and Exchange Commission approved direct investment in Bitcoin ETFs in January. CME declined to comment on the ongoing discussions.
The introduction of Bitcoin spot trading at CME will make it easier for investors to engage in basis trading. Basis trading is a strategy commonly used by professional Bitcoin traders, involving borrowing to sell futures and buying the underlying asset. This method takes advantage of the small price difference between futures and the actual asset. Most government bond basis trading occurs on the CME platform.
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Some of the world’s largest financial institutions have transitioned from Bitcoin skeptics to supporters. This change is due to Bitcoin’s rebound from its 2022 low to historic highs earlier this year, increasing investors’ acceptance of it as a tradable asset and regulatory crackdown on illicit market activities. Although Bitcoin has lost one-fifth of its value since surpassing $73,000 in March, ETFs linked to Bitcoin have become the fastest-growing ETFs in history.
Hedge funds such as Bracebridge Capital and pension funds like the Wisconsin Investment Board have already invested over $10 billion through Bitcoin-related investment tools managed by companies such as BlackRock, Fidelity, and Ark. In March, BlackRock CEO Larry Fink expressed long-term optimism about Bitcoin, further boosting confidence in this cryptocurrency.
CME has benefited from institutional reinterest in Bitcoin, surpassing Binance to become the world’s largest Bitcoin futures market. The exchange primarily serves hedge funds and proprietary traders, currently holding approximately 26,000 open positions worth around $8.5 billion, more than double compared to last year.
CME’s potential spot trading business will operate through the EBS currency trading platform in Switzerland, known for its strict regulation of cryptocurrency trading and storage. However, traditional exchange operators have had mixed success in spot cryptocurrency trading. For example, Deutsche Börse launched its digital asset marketplace this year, but CME’s competitor, CBOE Global Markets, recently closed its spot market due to unclear US regulations.
Some industry experts are skeptical about CME’s ability to gain market share between Chicago and Switzerland’s EBS. A crypto trading executive pointed out that the main benefit of CME’s move is the increased comfort of large regulated exchanges with the infrastructure required for trading digital assets. This development may lead to exchanges accepting collateral related to cryptocurrencies, such as tokenized currency market funds, for more timely margin calls.
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Further Reading
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