After the first Bitcoin spot ETF was listed in the United States in January of this year, Wall Street fund managers have seen a surge in demand for the cryptocurrency industry. Now, there are reports that the CME Group, the world’s largest futures exchange, is planning to launch Bitcoin spot trading. If successful, this will be another important milestone.
According to the Financial Times, three sources familiar with the negotiations revealed that the CME Group has been in discussions with traders who want to buy and sell Bitcoin in regulated markets. Although the plan has not been finalized yet, if implemented, it will signify further entry of major Wall Street institutions into the digital asset industry.
Currently, CME already offers Bitcoin futures trading. The introduction of Bitcoin spot trading will allow investors to engage in basis trading more easily.
What is basis trading?
Basis trading is one of the main strategies for professional Bitcoin traders and the US Treasury market. It involves selling futures contracts (going short) while simultaneously buying the underlying spot assets (going long), and profiting from the small difference between the two. Currently, most US Treasury basis trading is conducted on CME.
Hedge funds such as Bracebridge Capital, retirement funds such as the Wisconsin Investment Board, and others have already injected over $10 billion in investments into Bitcoin spot ETFs issued by asset management companies such as BlackRock, Fidelity, and Ark Investment Management. In March of this year, BlackRock CEO Larry Fink also expressed a “long-term bullish” attitude towards Bitcoin.
Further reading:
BlackRock CEO: Bitcoin’s price increase and demand even surprised me! If ETH is classified as a security, we will still issue Ethereum spot ETF.
Bitcoin spot trading may be conducted through EBS
Insiders revealed that the potential Bitcoin spot trading business to be introduced by CME will be conducted through EBS, a foreign exchange trading platform based in Switzerland. This platform is subject to strict regulation for trading and storing cryptocurrencies.
A senior executive of a cryptocurrency trading firm questioned whether CME’s Bitcoin trading business, if operated in two separate markets (CME in Chicago and EBS in Switzerland), can achieve a substantial market share. However, the biggest benefit of CME’s move is that large regulated exchanges are becoming more adaptable to the infrastructure of digital asset trading, such as secure token storage.
This executive pointed out that this means that large regulated exchanges may soon start accepting collateral related to cryptocurrencies, such as tokenized cryptocurrency market funds, in order to add margin more timely.
Related reports
Bitwise CIO: There are currently an estimated 700 institutional holdings of Bitcoin spot ETFs with a total scale of $5 billion… This is just the appetizer.
US core CPI in April hits a three-year low! Bitcoin surpasses $66,000, Ethereum reaches $3,000, as the Fed’s interest rate cut acts as a booster.
El Salvador mines 474 Bitcoins in 3 years using geothermal energy from volcanoes, truly a daily investment in BTC!