JPMorgan’s (JPM) plan to offer crypto trading to institutional investors could reportedly change the competitive landscape, but not necessarily at the expense of rivals.
Analysts say the entry of Wall Street giants could benefit existing players such as Coinbase (COIN), Blish (BLSH) and Galaxy Digital (GLXY), although it signals more competition to come.
“JPMorgan offering crypto trading to institutional investors would be a huge positive for the industry,” said ClearStreet analyst Owen Lau. “It will further legalize cryptocurrencies and increase distribution channels,” he continued. “The domino effect is likely to spread to other banks as well. Coinbase and Bullish are well-positioned to benefit from aggregating and matching orders from institutional investors from this large distribution channel.”
“JP Morgan is a broker and may use exchanges to match orders,” Lau continued. This opens up the possibility for platforms like Coinbase Prime and Bullish, which already offer institutional-grade cryptocurrency execution, to play a key role in settling these trades.
Read more: JPMorgan considers crypto trading for institutional investors as demand rises
Still, the move puts new pressure on incumbents. Compass Point’s Ed Engel wrote in a note last week that Wall Street’s growing involvement in cryptocurrencies “expands the addressable market for digital assets” while also increasing competition.
“Companies like GLXY and BLSH benefit from increased institutional participation, while COIN and Circle Financial (CRC)L face the risk of margin pressure,” Engel wrote.
Engel said that as institutional crypto activity picks up, trading volumes in both the spot and derivatives markets could increase, as well as demand for lending and custody services, areas where crypto-native companies have already built infrastructure. However, low-cost services such as basic spot trading may face downward pressure on fees.
“We believe GLXY is a key beneficiary of Wall Street’s crypto adoption due to its focus on principal trading, derivatives, and high-touch prime brokerage services,” Engel wrote. “BLSH could also benefit from Wall Street adoption, given that it already offers some of the lowest spot rates globally.”
To sum up, analysts believe that JPMorgan’s possible entry could draw more traditional financial institutions into the crypto market. But rather than replacing existing platforms, they could become deeply integrated into the plumbing of institutional finance, matching trades, providing custody, and providing risk management tools.
In practice, this could look like pension funds routing crypto trades through traditional Wall Street banks and then executing the trades on Coinbase Prime or Bullish. The more demand there is from JPMorgan and other major financial institutions that follow the funnel into the system, the more liquidity the platform will be able to acquire.
As of now, JPMorgan has not confirmed the launch of crypto trading for institutional investors, but the move seems likely as the bank has gradually turned its attention to this area, including launching its own stablecoin and considering blockchain payment tools.
