The news of the world’s largest futures exchange, CME Group, planning to launch bitcoin spot trading has caused a drastic drop of over 9% in the stock price of US-listed cryptocurrency exchange Coinbase, possibly due to the potential strong competition it may face.
CME Group, the Chicago Mercantile Exchange (CME), is reportedly planning to introduce bitcoin spot trading and has already entered discussions with traders who want to buy and sell bitcoin in regulated markets. Currently, CME offers bitcoin futures trading, and the introduction of spot trading would make it easier for investors to engage in basis trading.
Coinbase, the US-listed cryptocurrency exchange, experienced a steep decline of 9.48% to $199.07 on the 16th, possibly as a result of this news.
If CME enters the bitcoin spot trading market, it would be bad news for Coinbase. Although the majority of Coinbase’s revenue still comes from transaction fees charged to retail investors, the first-quarter financial report showed that its consumer trading revenue was $935 million, while institutional revenue was $85 million. However, with the growing interest of traditional institutions in cryptocurrencies, the pressure they may exert on native exchanges cannot be underestimated.
Earlier this year, with the approval and listing of bitcoin spot ETFs, there has been increased interest in cryptocurrencies among Wall Street and financial institutions. This has also been reflected in Coinbase’s performance, with consumer trading volume in the first quarter growing by 93% compared to the previous quarter, and institutional trading volume growing by 105%. The growth of Coinbase’s institutional business revenue has also exceeded that of its consumer business.
CME, as reported by Coindesk, is the largest bitcoin futures exchange in the United States. Headquartered in Chicago, the Chicago Mercantile Exchange (CME) has a history of more than a century and has been designated by US regulatory agencies as a “systemically important financial market facility.” This means that CME is subject to stricter regulation, and many investors believe that the government will never allow CME to collapse under financial pressure. In terms of open interest contracts, CME is already the largest bitcoin futures exchange in the United States.
A common reason why traders do not want to engage with digital assets is due to a lack of trust in cryptocurrency exchanges. The recently launched bitcoin spot ETF provides traders with a safer way to gain exposure to bitcoin. Bitwise has estimated that in the first quarter, there were over 700 institutions holding positions in bitcoin spot ETFs, with a total assets under management of $5 billion.
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