According to Financial Times.The Chicago Mercantile Exchange (CME), the world’s largest futures exchange, is reportedly in discussions to introduce Bitcoin (BTC) spot trading. The move is aimed at capitalizing on growing demand among Wall Street money managers who want exposure to the cryptocurrency sector.
The move marks a significant step for major Wall Street institutions to enter the digital asset space following the approval of 11 Bitcoin spot funds (ETFs) by the US Securities and Exchange Commission (SEC) in January.
Direct Bitcoin price catalyst?
By introducing Bitcoin spot trading on its platform, which Bitcoin already facilitates futures tradingCME Group would enable investors to more easily engage in underlying trades.
Basis trading, a strategy widely used among professional traders and common in the U.S. Treasury bond market, involves selling futures contracts while purchasing the underlying asset to take advantage of the price difference between them.
What’s even more captivating is that instant Bitcoin purchases have a direct impact on this BTC price, because buyers own the actual asset. This direct ownership strengthens the link between Bitcoin demand and its price, resulting in a catalyst for an upside if plans for this launch come to fruition.
Additionally, spot markets, which are more liquid than futures markets, enable effective price discovery and seamless trading. In addition, arbitration opportunities between exchanges lend a hand to equalize prices and reduce discrepancies.
In summary, by facilitating spot purchases, investors contribute to price discovery, raise liquidity, and potentially create a more stable and competent market for the price of BTC.
The number of job vacancies is growing rapidly as institutional demand increases
Bitcoin’s resurgence from its 2022 low to a record high of $73,700 earlier this year, coupled with increased acceptance among investors, has transformed some of the world’s largest financial institutions from Bitcoin skeptics to supporters.
BTC-linked exchange-traded funds have seen significant growth, attracting significant investment from hedge funds such as Bracebridge capital and pension funds such as Wisconsin Investment Board. Asset managers including BlackRock, Fidelity and Ark have seen over $10 billion in assets flow into their cryptocurrency vehicles.
According to the Financial Times, the main beneficiary of the contract renewal was the CME group institutional interestovertaking Binance to become the world’s largest BTC futures market.
The Chicago market now has about 26,000 open positions worth about $8.5 billion, more than double the amount from a year ago. Potential spot trading will be operated via the EBS currency trading system in Switzerland, which adheres to “robust regulations” governing the trading and custody of cryptocurrencies.
However, one industry executive questioned whether CME Group could achieve significant market share if its Bitcoin trading business operated in two separate markets – CME in Chicago and EBS in Switzerland. Concerns include potential inefficiencies resulting from this approach.
As CME Group nears finalizing its plans for spot Bitcoin trading, it highlights the growing integration of conventional financial institutions into the evolving cryptocurrency landscape. The potential for increased market access, liquidity and infrastructure promises to shape the future of institutional participation in the digital asset space.
At the time of publication, the largest cryptocurrency on the market is trading at $66,000 and has been struggling to completely break this level over the last 24 hours. This level is one of the key walls of resistance for BTC on the way to retesting higher levels and currently represents an all-time high.
Featured image from Shutterstock, chart from TradingView.com
