After the first Bitcoin spot ETF was listed in the United States in January this year, Wall Street fund managers have seen a surge in demand for the cryptocurrency industry. Now, the CME Group, the world’s largest futures exchange, is reportedly planning to launch Bitcoin spot trading. If successfully implemented, this would 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 on regulated markets. Although the plan has not been finalized, if implemented, it would mark a further entry of major Wall Street institutions into the digital asset industry.
Currently, CME already offers Bitcoin futures trading. Introducing Bitcoin spot trading would 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 (shorting) and simultaneously buying the underlying spot assets (going long) to profit from the small difference between the two. Currently, most US Treasury basis trading is conducted on the CME.
Hedge funds like Bracebridge Capital, retirement funds like 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. In March of this year, BlackRock CEO Larry Fink also expressed a “long-term bullish” attitude towards Bitcoin.
Extended reading: BlackRock CEO: Bitcoin’s price increase and demand even surprised me! If ETH becomes a security, we will still issue Ethereum spot ETF.
Bitcoin spot trading may be conducted through EBS. According to insiders, the potential Bitcoin spot trading business that CME may launch will be conducted through the EBS 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 trader questioned whether CME’s Bitcoin trading business, if operated in two separate markets (CME in Chicago and EBS in Switzerland), could gain a significant market share. However, the biggest benefit of this move by CME is that large regulated exchanges are becoming more adaptable to the infrastructure of digital asset trading, such as secure token storage.
According to this executive, this means that large regulated exchanges may soon accept collateral related to cryptocurrencies, such as tokenized currency market funds, in order to add margin in a more timely manner.
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