JPMorgan’s (JPM) announced plan to offer cryptocurrency trading to institutional clients could reshape the competitive landscape, but not necessarily to the detriment of its rivals.
Analysts say the Wall Street giant’s entry could benefit existing players like Coinbase (COIN), Bullish (BLSH) and Galaxy Digital (GLXY), even as it signals tougher competition to come.
“If JPMorgan offers cryptocurrency trading to institutional clients, it will be a big benefit to the space,” said Owen Lau, an analyst at ClearStreet. “This will further legitimize crypto and increase distribution channels,” he continued. “The domino effect will likely spill over to other banks. Coinbase and Bullish are well-positioned to benefit from the aggregation and matching of institutional orders from this large distribution channel.”
“JPMorgan is a broker, they potentially use exchanges to match orders,” Lau continued. This opens the door for platforms like Coinbase Prime and Bullish – which already offer institutional-grade crypto execution – to play a key role in settling these transactions.
Read more: JPMorgan evaluates cryptocurrency trading for institutions amid growing demand
This decision nevertheless adds new pressure on incumbent operators. In a note last week, Compass Point’s Ed Engel wrote that while Wall Street’s growing involvement in crypto is “expanding the addressable market for digital assets,” it is also intensifying competition.
“Companies like GLXY and BLSH benefit from higher institutional ownership while COIN and Circle Financial (CRC)L face risks of margin pressure,” Engel wrote.
As institutional crypto activity increases, Engel said trading volumes in spot and derivatives markets are expected to increase, as well as demand for lending and custody services – areas where crypto-native firms have already built infrastructure. However, less demanding services, such as basic spot trading, may experience downward pressure on fees.
“We believe GLXY is one of the primary beneficiaries of crypto adoption on Wall Street, given its focus on principal trading, derivatives, and prime brokerage services,” Engel wrote. “BLSH can also benefit from Wall Street adoption given that it already offers some of the lowest spot fee rates in the world.”
To summarize the analyst, JPMorgan’s potential entry could attract more traditional institutions to the crypto market. But instead of displacing existing platforms, it could push them deeper into the plumbing of institutional finance – matching transactions, providing custody and offering risk management tools.
In practice, this could look like a pension fund routing a crypto transaction through a traditional Wall Street bank, only to have it executed on Coinbase Prime or Bullish. The more JPMorgan and any major lenders that track demand infiltrate the system, the more liquidity these platforms can capture.
At this point, JPMorgan has not confirmed the launch of crypto trading for institutional clients, but the move seems more likely than not as the bank has gradually adapted to the sector, including launching its own stablecoin and exploring blockchain settlement tools.
