CME Group to launch spot bitcoin trading

The Chicago Mercantile Exchange (CME) Group, the world’s largest futures exchange, will soon offer spot Bitcoin trading as cryptocurrency becomes increasingly mainstream and demand continues to rise.

According to a report by the Financial Times, CME has been in discussions with cryptocurrency traders to create a regulated marketplace for spot Bitcoin trading. The platform, known for being the largest Bitcoin futures trading platform, is expected to be operated by Swiss-based currency trading platform EBS.

Spot trading involves the buying or selling of assets at the current market price, as opposed to futures trading, which allows traders to speculate on the price movements of cryptocurrencies without actually owning them. Despite the volatility of cryptocurrency prices, spot trading is considered to carry a relatively lower level of risk since traders are only exposed to the price movements of the assets they own. However, the returns on spot trades are generally not as high as those from futures trading.

Introducing spot Bitcoin trading on CME would enable traders to engage in basis trades, a strategy profiting from the small price differences between futures contracts and the underlying spot Bitcoin.

This development follows the Securities and Exchange Commission’s approval of spot Bitcoin ETFs in January, which allowed major financial institutions such as BlackRock and Fidelity to enter the digital assets market. The move provided traders with a safer way to invest in Bitcoin, attracting over 500 institutions within the first three months and allocating over $10 billion to the funds. An additional $40 billion came from retail traders.

Shares of Coinbase dropped nearly 8% to $202.49 during U.S. morning hours on Thursday following the Financial Times report about CME’s potential move into spot Bitcoin trading.

Chicago-based CME, a financial powerhouse with a history spanning more than a century, has been designated by U.S. regulators as a “systemically important financial market utility,” which subjects it to stricter supervision. This designation also implies that the government would likely intervene to prevent CME from failing in the event of financial distress.

A common reason traders have avoided digital assets is the lack of trust in crypto exchanges, especially following the exposure of several bad actors in recent years, including the collapse of the once-popular crypto exchange FTX.