Crypto

CME Targets Spot Bitcoin Market, Rivals Coinbase and Binance

CME plans to launch spot bitcoin trading, challenging Coinbase and Binance amid growing institutional interest in cryptocurrencies.

By Alex P. Chase

5/16, 14:48 EDT
Bitcoin / U.S. dollar
CME Group Inc.
Coinbase Global, Inc.
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Key Takeaway

  • CME plans to offer spot bitcoin trading, challenging Binance and Coinbase, leveraging its position as the top bitcoin futures exchange.
  • The proposed spot market at CME aims to attract institutions preferring regulated trading environments for complex strategies.
  • This move could shift some business from existing crypto exchanges to CME, emphasizing the growing institutional interest in cryptocurrency markets.

CME Eyes Spot Bitcoin Trading

The Chicago Mercantile Exchange (CME), a futures powerhouse, is reportedly planning to offer spot bitcoin trading, responding to strong client demand for such a product. This move could significantly impact the cryptocurrency market landscape, especially for exchanges like Coinbase, which saw its shares drop nearly 8% to $202.49 following the news. The CME, with its deep roots in the financial markets and a history dating back over a century, is already the leading bitcoin futures exchange by open interest in the U.S. The introduction of a spot market could attract more institutional investors, who prefer regulated marketplaces for their transactions.

Coinbase Faces Competition

Coinbase, the only U.S. traded crypto exchange and ranked third by daily trading volume, could face stiff competition from CME's entry into the spot bitcoin market. The Financial Times report suggests that CME's spot trading business might operate through the EBS currency trading venue in Switzerland. This development is particularly noteworthy as Coinbase has benefited from being perceived as the most trusted crypto exchange in the U.S. However, the landscape is changing with the entry of traditional financial powerhouses like CME, which is considered a "systemically important financial market utility" by U.S. regulators, implying a higher level of trust and stability.

Institutional Interest in Crypto Grows

The potential debut of a bitcoin spot market on the CME is driven by increasing institutional interest in cryptocurrencies. Recently launched spot bitcoin exchange-traded funds (ETFs) have already attracted over $50 billion in investments within three months, with over $10 billion from institutions and the rest from retail traders. This surge in ETF activity underscores the growing credibility of bitcoin as a long-term investment option. Markus Thielen, founder of 10x Research, commented on the situation, stating, "Crypto exchanges might lose some business with the potential debut of a bitcoin spot market on the CME, a global derivatives giant, as the present bull run is particularly driven by institutions, who prefer to trade on regulated avenues."

Street Views

  • Markus Thielen, 10x Research (Neutral on the impact of CME's bitcoin spot market):

    "Crypto exchanges might lose some business with the potential debut of a bitcoin spot market on the CME, a global derivatives giant, as the present bull run is particularly driven by institutions, who prefer to trade on regulated avenues."