The day is finally here—today, depends on how you cut it, the CME Group will be launching a futures market for Ethereum.
The CME Group is one of the world’s leading financial exchanges, hosting a majority of trade in top commodities, including Bitcoin. The CME Group made crypto headlines in 2017 when it rolled out futures for BTC.
As that launch coincidentally marked the top of the 2017 bull market, some have speculated that this will have the same effect this time around. A number of traders have postulated that this launch can cause a short-term top.
Though, a vast majority of analysts appear to be bullish on Ethereum as the launch of this regulated investment vehicle rolls around. This market should allow institutional players to obtain better exposure to Ethereum.
Analysts comment on Ethereum CME futures launch
Analysts seem to be largely bullish or at least neutral on the upcoming launch of the CME’s Ethereum futures contracts.
Ryan Watkins, a researcher/analyst at Messari, recently noted that the “fear” of how the upcoming launch could affect the crypto market is “ridiculous.”
Watkins highlighted that the fears of a correction after this launch stem from “one data point.” That’s to say, just because the previous CME crypto futures launch coincided with a previous top doesn’t mean it will happen for a second time. Furthermore, he said that there are clear differences in the market conditions in December 2017 and market conditions now.
Fear of the upcoming ETH CME futures launch is ridiculous.
Not only does that fear stem from just one data point, but there’s also clear differences between market conditions in December 2017 and market conditions now.
Also don’t think institutions are itching to short ETH…
— Ryan Watkins (@RyanWatkins_) February 7, 2021
He did not name these changes in his thread, though just to highlight two:
- Futures are not extremely overleveraged as they were in previous bull trends or previous segments of the ongoing uptrend
- And secondly, there is a clear institutional bid as made clear by public announcement by Wall Street funds, on-chain data, and interviews published by top media outlets.
Economist Alex Kruger discussed more tangibly how this launch can drive a bid in the Ethereum market.
“This is a great point. CME futures will allow parties that at present have difficulties accesing $ETH markets to hedge Grayscale’s $ETHE risk, driving increased $ETHE institutional demand, thus increasing spot demand and compressing the $ETHE premium.”
Existing investors that have access to ETHE and Grayscale’s products may not want to purchase the product, even at net asset value. The introduction of futures, which should trade at/very close to the spot price, and have lower fees that fund products, may provide a better way for certain players to buy Ethereum.
Disclaimer: This author is an analyst at ParaFi Capital. ParaFi Capital may hold positions in assets mentioned in this article. The views displayed in this article are opinions of the author—and the author only.