Shares of Coinbase (NASDAQ:COIN) fell nearly 8% on Thursday, dropping to $202.49, following a Financial Times report that the Chicago Mercantile Exchange (NASDAQ:CME) might soon offer spot bitcoin trading amid strong interest from its clients.
Cryptocurrencies were up on the day, with the CoinDesk 20 Index, which tracks 20 of the largest digital tokens by market capitalization, rising 0.91% over the past 24 hours. Bitcoin was up by half a percent, benefiting from Wednesday’s better-than-expected inflation report. Despite the drop, COIN is up 29% year-to-date, buoyed by the rally in crypto prices since the beginning of the year.
Chicago-based CME, the world’s largest futures exchange, has a history spanning more than a century and is a financial powerhouse. Until now, Coinbase has profited from being the most trusted crypto exchange in the U.S., but this advantage could be challenged if CME enters the spot bitcoin trading market.
Designated by U.S. regulators as a “systemically important financial market utility,” CME is subject to stricter supervision. Many investors believe this designation implies the government would prevent CME from failing in a financial crisis. CME is already the leading bitcoin futures exchange in the U.S. by open interest.
The exchange has been in discussions with traders interested in trading bitcoin on a regulated marketplace, sources familiar with the matter told the Financial Times. A significant barrier for traders in dealing with digital assets is the lack of trust in crypto exchanges, particularly after several high-profile failures, including the collapse of the once-popular crypto exchange FTX.
The recent launch of spot bitcoin exchange-traded funds has provided traders with a safer way to invest in bitcoin, with over 500 institutions allocating more than $10 billion to these funds within the first three months. An additional $40 billion came from retail traders.
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