The CME Group, the world’s largest futures exchange, is preparing to venture into Bitcoin trading, aiming to cash in on this year’s growing demand among Wall Street financial managers and gain access to the cryptocurrency sector.
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According to three individuals familiar with the negotiations, the Chicago-based group is in talks with traders who want to buy and sell cryptocurrency on a regulated market. While the details of the trading platform are still being ironed out, the potential entry of CME underscores the continued interest of major Wall Street players in the crypto sector.
The plan, which is still in its infancy, would signify further forays by major Wall Street institutions into the digital asset sector following the approval by the U.S. Securities and Exchange Commission in January of stock market funds that invest directly in Bitcoins.
CME’s Crypto Expansion
Introducing BTC spot trading on CME will allow traders to engage in underlying deals. This trading strategy aims to profit from minor price differences present in futures contracts and the underlying BTC spot. CME’s spot trading business can be conducted through the EBS trading platform in Switzerland.
The availability of the spot market means traders can now devise complex multi-stage strategies involving spot and futures markets in one regulated place. While it’s noted that CME’s plan to launch Bitcoin trading is not yet finalized, it will enable investors to more easily place so-called underlying trades, which is a common strategy among professional Bitcoin traders. Underlying trades involve borrowing money to sell futures and simultaneously buying the underlying asset, opening the possibility to profit from a small price gap between them.
If it launches, it won’t be CME’s first foray into cryptocurrencies. The Chicago exchange already operates a cryptocurrency futures exchange offering standard and micro Bitcoin and Ethereum contracts. CME even leads in bitcoin futures exchanges in terms of open interest, surpassing Binance, which otherwise dominates the spot market.
Key Competitors in the Crypto Industry
Meanwhile, CME’s entry into Bitcoin spot trading could pose serious competition to Binance, the largest cryptocurrency exchange by trading volume, which is currently under scrutiny by regulators worldwide. Binance was the leading Bitcoin Futures platform in the world before CME’s surge in activity.
Crypto exchanges may lose some business due to the potential debut of the Bitcoin spot market on CME, a global derivatives giant, as the current bull run is particularly driven by institutions preferring to trade on regulated platforms.
Markus Thielen, founder of 10x Research. Source: CoinDesk
Giants like Deutsche Börse have also entered the cryptocurrency market this year. CME’s competitor, CBOE Global Markets, already offers cryptocurrency spot trading, which it will soon discontinue due to the lack of rules in the country.
Indeed, while Europe prepares for cryptocurrency regulation with the introduction of the Markets in Crypto-Assets Regulation (MiCA), the U.S. lags behind. Although U.S. regulators unanimously agreed to classify Bitcoin as a commodity, the status of other crypto assets remains unclear.
More on Bitcoin:
- This Week in Bitcoin: Declining Sell Side Momentum with Bulls Preparing to Reign
- What Happens to Lost Bitcoin?
Despite the murky rules, the SEC approved Bitcoin exchange-traded funds in January last year, putting an end to years of anticipation. These instruments opened up the opportunity to easily invest in Bitcoin for both retail and institutional investors.
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