Ethereum Futures Are Coming Down the Pipe

CME Group, that is the Chicago Mercantile Exchange, which also spearheaded Bitcoin Futures, is now gearing up to offer Ethereum Futures as well. A few things to consider about this upcoming news. In such a volatile market, how does one surmise a daily spot price for Ethereum, and which exchanges are to be the importing information centers, as many of them, on a day to day basis, (as one stackexchange.com user notes) vary in price listing. 

cmegroup.jpg

Both the Ether Reference Rate and the Ether Real-Time Index will be supplied by UK's Crypto Facilities. The price will be imported by two exchanges, SF-based Kraken, and Luxembourg-based bitstamp. Ether futures, much like last years event of Bitcoin futures, mark a rise in the mainstream adoption of cryptocurrencies. This type of offer now enables investors to short the market, an option that is only now existing for the flag-ship currency BTC, and forthcoming, ETH. 

A point of concern, or mere consideration, discovered by a team of researchers (Galina Hale, Arvind Krishnamurthy, Marianna Kudlyak and Patrick Shultz) writing for the Federal Bank of San Francisco, note that the event of a futures market for Bitcoin coincided with a steady decline in market valuation, which they believe is not a coincidence. The gist of their research indicates that since the option to bet against the rise of the currency had not yet existed, this new "doubt-money", which enabled investors to acquire and sell BTC a month after they took futures bets out on it, frustrated the general growth and rise in value of the coin. 

Perhaps, over the long term, this will be a good thing, as it strengthens the crypto market to have money flushed into it, regardless of whether it is a bear or bull type investment. But, nascent crypto currencies like ETH have yet to deal with such an infusion, and may behave sluggishly at the onset of such activities. The aforementioned researches could not account for the fact that BTC's decline post futures offering was  relatively slow and not sharp, as might have been expected. 

CME's Bitcoin futures, as of this date, have, "seen a gradual uptick in trading volume" since its inception. Tim McCourt, CME's head of equity products and alternative investments, had this to say, "The Ether Reference Rate and Real Time Index are designed to meet the evolving needs of this marketplace. Providing price transparency and a credible price reference source is a key development for users of Ethereum."

As to just exactly when ETH futures can be expected to enter the market via CME Group, remains to be determined. Be on the look out for bear-shorts stifling daily price growth... (This article is opinion only, and does not constitute financial advice). 

 

Joseph Voelbel is a Blockchain Researcher living in Los Angeles. You can follow him on Twitter