Markets
CME’s Plan to Offer Bitcoin Spot Trading Opens a ‘World of Opportunities’ for Wall Street – DL News
- According to a report, CME Group is planning to offer spot trading of Bitcoin on its futures exchange.
- The move marks Wall Street’s further encroachment into the world of cryptocurrencies.
- Hedge funds and pension funds are more likely to use these services than those offered by Coinbase, an analyst says.
CME Group’s plans to offer spot trading for Bitcoin on its futures exchange allow it to acquire customers from native crypto firms, marking a further Wall Street encroachment into the cryptocurrency realm.
The exchange has been conducting discussions with traders who want to learn more about cryptocurrencies Financial Times he reported Thursday, citing three people with direct knowledge.
It’s a sign that more Wall Street firms are seizing on opportunities in the cryptocurrency sector after BlackRock’s Bitcoin ETF unleashed a record wave of new money into the sector.
“This is huge,” said Jonathan de Wet, chief investment officer at digital asset trading firm Zerocap DL News. “Spot margins on the CME open up a world of opportunities for TradFi institutions.”
While it was still in the planning stage, said Ryan McMillin, chief investment officer at crypto fund manager Merkle Tree Capital DL News that hedge funds, pension funds and sovereign wealth funds are more likely to engage with CME rather than crypto-native companies like Coinbase.
The reason? These companies do not have the same relationship with Coinbase as they do with CME.
While still under study, the CME’s offering for spot trading would provide investors with a one-stop shop to place spot margin trades on the CME, opening up opportunities for Wall Street to bet more on Bitcoin outside of ETFs.
Spot margin trading allows entities to borrow funds to increase the size of their spot market position, leveraging their trades and potentially amplifying gains and losses.
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De Wet said providing additional regulated institutional entry points would likely fuel adoption by a risk-averse investor class.
It pointed to an “exhaustive process” for larger fiduciary investors to undergo due diligence as the reason they would opt for CME’s offering.
Coinbase is one of the few cryptocurrency exchanges operating in the United States under a regulated banner following its 2021 Nasdaq listing.
Others include Kraken, which is regulated by the Financial Crimes Enforcement Network, and Gemini, which also answers to the New York State Department of Financial Services.
Hedge funds and pension funds have already taken the opportunity to dive deeper into the world of cryptocurrencies this year.
And the Wisconsin State Investment Council bought $99 million of iShares Bitcoin Trust, BlackRock’s Bitcoin exchange traded fund, based on it and nine similar ETFs launched in the U.S. this year.
The CME did not return DL News‘ request for comment.
Sebastian Sinclair is a markets correspondent for DL News. Do you have advice? Contact Seb at sebastian@dlnews.com.