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Ready to launch Ether Future on the CME

The Chicago Mercantile Exchange (CME) launches the February 8 Ether Future (https://www.cmegroup.com/trading/ether-futures.html). Ether is the future dedicated to the cryptocurrency on the Ethereum blockchain, second in market capitalization after Bitcoin. The CME Group is the world’s largest and most diversified derivatives market and has been offering Bitcoin Future since 2017.

In December last year, at the announcement of the launch, the director of equity indices and alternative investment products, Tim McCourt, had said, “We believe the addition of Ether futures will provide our clients with a valuable tool to trade and protect this growing cryptocurrency.” Ether, whose price has more than doubled since then, has performed better than Bitcoin during 2020, yet its price is still below its all-time high (touched up a few days ago) and therefore still seems to have room for growth.

The launch of the Ether future on the CME leaves open many questions about the development of the Ether price near the fateful date and in the weeks that follow. At first glance, the precedent does not seem auspicious: when the Bitcoin Future was made in mid-December 2017, there was a sharp drop in the price of Bitcoin in U.S. dollars, and the asset, after hitting an all-time high, saw the price lose 45 percent within a week, starting a long downtrend (referred to as the “cryptowinter”).

What will the launch of the Ether Future entail?

However, the launch of the Ether Future takes place in a very different market environment from that of late 2017. In fact, the current uptrend is supported by the massive interest in cryptocurrency by institutional investors (such as Grayscale or Microstrategy). It may not be a coincidence that the first major increase in Bitcoin’s price occurred last October, when PayPal and Fidelity Digital Assets announced the integration of major cryptocurrencies within their services.

On the very day the Ether Future was announced, JPMorgan Chase analyst Nikolaos Panigirtzoglou noted how Bitcoin adoption was spreading not only among more or less wealthy retailers, but also among insurance companies and pension funds. He suggested how the investment in Bitcoin by insurance company MassMutual clearly marked the potential for increased institutional demand in the coming years. As Sui Chung, CEO of CF Benchmarks, points out, the launch of Ether Future is another step in the process of institutionalizing the cryptocurrency market.

The launch of the future comes at a very important stage in the development of the Ethereum network

The launch of the future comes at a very important stage in the development of the Ethereum network, which has undertaken the transition from Proof of work (PoW) mode of transaction validation to Proof of stake (PoS) mode. With “Ethereum 2.0” and the advent of PoS, the computationally and consumption-intensive competitive mining activity will be replaced by the blocking (staking) of ETHs in a smart contract with a draw for validation of transactions and collection of related fees by validators. Although the stake includes a constraint that can only be loosened with the final launch of ETH 2.0, data aggregator Glassnode reports great participation by Ether holders. To date an amount of ETH equal to the current value of $4 billion has been locked into the ETH 2.0 deposit contract.

Moreover, the Ethereum network is intrinsically linked to the development of the DeFi (Decentralized Finance) sector, whose main projects and protocols are active on its blockchain: all major DeFi projects, including the well-known automated market maker Uniswap, are based on Ethereum. The success of the DeFi sector in recent months has as its downside the current network congestion that results in high transaction fees, which result in Ether buying pressure on the market.

Ultimately, the explosion of the Ethereum-based DeFi sector and the large amount of coin staking represent key elements in outlining the upside potential of Ether’s pricing, and the launch of the Ether Future could further boost interest in this asset. However, turbulence cannot be ruled out in the run-up to the launch on the CME, and in the weeks to follow, due to the inherent volatility of the cryptocurrency market.

Gianluigi Cosi – OG Crypto

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