The Financial Times reported that CME Group, the world’s largest futures exchange, is preparing to launch Bitcoin spot trading. The move aims to capture growing demand from Wall Street money managers for the cryptocurrency space. According to internal sources, the Chicago-based company is in discussions with traders interested in buying and selling Bitcoin on regulated markets.
The plan, which is still under consideration, represents an important step for a major Wall Street institution to enter the digital asset space. Previously, the U.S. Securities and Exchange Commission approved ETFs that invest directly in Bitcoin in January. CME declined to comment on the ongoing discussions.
The introduction of Bitcoin spot trading on CME will make it easier for investors to conduct basis trading. Basis trading is a strategy commonly used by professional Bitcoin traders that involves borrowing money to sell futures and purchase the underlying asset. This method takes advantage of the small price difference between futures and the actual asset. Most Treasury basis trading occurs on the CME platform.
Some of the world’s largest financial institutions have transitioned from Bitcoin skeptics to supporters. The change comes as Bitcoin rebounds from its 2022 lows to all-time highs earlier this year, increasing investor acceptance of it as a tradable asset and a regulatory crackdown on illegal market activity. Although Bitcoin has lost a fifth of its value since topping $73,000 in March, Bitcoin-linked ETFs have become the fastest-growing in history.
Large investors such as hedge funds such as Bracebridge Capital and pension funds such as the Wisconsin Investment Commission have made Bitcoin-related investments managed through firms such as BlackRock, Fidelity and Ark More than $10 billion has been invested in tools. In March, BlackRock CEO Larry Fink expressed long-term optimism about Bitcoin, further boosting confidence in the cryptocurrency.
CME has benefited from renewed institutional interest in Bitcoin, surpassing Binance to become the world’s largest Bitcoin futures market. The exchange, which primarily serves hedge funds and proprietary traders, currently has about 26,000 open positions worth about $8.5 billion, more than double last year.
CME’s potential spot trading operations will be operated through Switzerland’s EBS Currency Trading Platform, which is known for its strict regulations on the trading and storage of crypto assets. However, traditional exchange operators have had mixed success with spot cryptocurrency trading. For example, Deutsche Börse launched its digital asset market this year, but CME rival CBOE Global Markets recently closed its spot market amid regulatory uncertainty in the United States.
Some industry experts have expressed doubts about whether CME can expand its market share between Chicago and EBS in Switzerland. One crypto trading executive noted that the main benefit of CME’s move is increased comfort among large regulated exchanges with the infrastructure required to trade digital assets. This development could lead to exchanges accepting crypto-related collateral, such as tokenized money market funds, to allow for more timely margin calls.
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