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Coinbase stock came under strong selling pressure on Thursday, as giant CME Group announced its plans to offer spot Bitcoin trading. This regulated platform could provide tough competition to Coinbase amid its ongoing SEC battle.
On Thursday, May 16, shares of crypto exchange Coinbase Global Inc (NASDAQ: COIN) tanked by 9.4% while slipping under the crucial support levels of $200. This selling pressure came as news emerged that the future trading platform Chicago Mercantile Exchange (CME) is planning to introduce spot trading for Bitcoin in the coming times. This would put a direct competition to popular crypto exchanges like Coinbase and others thereby eating into their market share.
The Coinbase stock has been one of the top-performing stocks of 2023 with more than 225% gains over the past year. Also, the year-to-date gains for the COIN stock are at 29%.
The Chicago-based CME Groupo has been operating for more than a century now and is one of the largest futures exchanges popular worldwide. On the other hand, Coinbase has emerged as one of the most trusted and popular crypto trading platforms in the US. Earlier this month, the crypto exchange announced strong Q1 numbers amid a strong surge in the broader cryptocurrency market.
However, this dominance can change for Coinbase, if CME comes up with its own spot trading facilities. As per the open interest, the Chicago Mercantile Exchange is already the biggest Bitcoin futures exchange in the United States. On the other hand, crypto exchange Coinbase has been recently facing some outage issues leading to major crypto volatility earlier this week.
The CME has been designated by US regulators as a “systemically important financial market utility”, which subjects it to stricter supervision. This designation also leads many investors to believe that the government would ensure the CME’s stability in the event of financial distress.
CME’s Push for Spot Trading
The CME exchange has been in discussions with traders interested in trading bitcoin on a regulated marketplace, according to sources familiar with the matter, as reported by the Financial Times.
The launch of Bitcoin spot trading on the CME would enable traders to profit from basis trades, capitalizing on the difference between futures prices and the underlying asset’s spot price.
Specifically the CME Group are looking at launching spot trading of #Bitcoin.
When taken together with their futures product it allows hedge funds to trade basis. (Short BTC + buy Spot for 20% APY)
In effect taking BTC long positions will get cheaper. https://t.co/MhLUWk4rro
— Willy Woo (@woonomic) May 17, 2024
A prevalent reason for traders’ hesitancy towards digital assets is the lack of trust in crypto exchanges, especially following the exposure of several bad actors in recent years, including the formerly popular crypto exchange FTX.
The recently launched spot Bitcoin ETFs have given a safer way for investors to seek exposure to Bitcoin. More than 500 institutional players have already gained exposure to Bitcoin ETFs just within the first three months of launch while allocating over $10 billion in funds.
