- Coinbase has reached a surveillance agreement with the Chicago Board Options Exchange (CBOE) for the launch of spot Bitcoin ETF applications.
- The proposed changes align completely with what BlackRock and Valkyrie have published for their own spot Bitcoin ETF applications for the competing Nasdaq market, with Coinbase referred to as the surveillance side.
- The exchange platform, led by CEO Brian Armstrong, currently manages approximately half of all spot Bitcoin transactions in the United States.
The agreements with NASDAQ and CBOE have strengthened Coinbase’s corporate relationships as the largest cryptocurrency exchange in the United States.
Coinbase and Cboe Enter Surveillance Agreement
Cryptocurrency exchange Coinbase entered into a surveillance agreement with the Chicago Board Options Exchange (CBOE) for the launch of spot Bitcoin ETF applications. The company, led by CEO Brian Armstrong, has become the preferred market for financial product applications from hedge funds such as Fidelity, WisdomTree, VanEck, Invesco, and 21Shares that have chosen CBOE as their official partner.
The proposed changes align completely with what BlackRock and Valkyrie have published for their own spot Bitcoin ETF applications for the competing Nasdaq market, with Coinbase referred to as the surveillance side. Coinbase’s selection as a partner for all these ETFs stems from its central role in the cryptocurrency trading world in the United States.
The exchange platform, led by CEO Brian Armstrong, currently manages approximately half of all spot Bitcoin transactions in the United States. This news has uplifted crypto investors’ morale and led to unusual performance in COIN shares.
If the ETFs offered by asset management firms and hedge funds are approved, Coinbase will play a significant role in managing and securing transactions against manipulation. According to Bloomberg Intelligence analyst James Seyffart, with BlackRock reaching “agreement on terms” with Coinbase on June 8th, Nasdaq appears to be ahead of CBOE in potential approval.
Mark Yusko, founder of Morgan Creek Capital, agrees with Seyffart, stating that BlackRock is one step ahead and the SEC might allow them to be the first to enter the market. Matthew Sigel, the Director of Digital Asset Research at VanEck, shares the same sentiment, believing that the SEC should approve all proposals at once.
Strengthening Relationship with Institutional Clients
Before partnering with numerous hedge funds and asset management firms for the Spot Bitcoin ETF, Coinbase was perceived as a highly compliant company focused on services for institutional clients.
Now, after being selected as the surveillance side for the Chicago Board Options Exchange, this relationship has become even stronger. Unlike other cryptocurrency exchanges that rely primarily on retail trading for revenue, Coinbase, which handles higher trading volumes, prefers to focus on more financially powerful institutions.
For example, in the first quarter of 2023, 85% of the volume recorded on the Coinbase platform belonged to institutional clients, with these clients accounting for $124 billion out of a total trading volume of $145 billion. In 2021, a bullish year for the cryptocurrency market, retail traders were more significant for the company’s revenue, representing approximately 30% of the trading volume each quarter.
Total volume recorded by Coinbase declined in 2022 and reported lower profits compared to the previous year, in line with all exchanges in the industry. However, despite the market downturn, metrics related to transaction volume and verified new users remained high.
These figures indicate a positive interest base in the industry, even during the most intense period of the crypto winter. When the spot ETF is approved or when the cryptocurrency market returns to a bullish phase, it is likely that Coinbase’s metrics will increase.
