What to expect from the launch of ETH futures by the U.S. exchange CME?

What to expect from the launch of ETH futures by the U.S. exchange CME?

This week bitcoin finally surpassed the $20k mark. It’s something we’ve all been waiting for over three years and we want to congratulate all cryptans on this long-awaited event!

But today we are going to talk about not less important event in the industry, which took place on December 16, namely the news about launching futures contracts on Ethereum for institutional traders from American Chicago Mercantile Exchange (CME). Trading is scheduled to begin on February 8.

In this article, we will remember how CME steamrolled and crashed bitcoin by launching the first bitcoin futures; why investing in Ethereum might be a good idea and what we can expect from this event next year.

The launch of Ethereum futures on the CME

The Chicago Mercantile Exchange (CME) is part of the CME Group, a global holding company that was the first in North America (and the second in the world) to offer futures contracts. The exchange opened at the end of the 19th century, and today it is one of the most authoritative and largest exchanges in the world.

Since 2017, CME began using cryptocurrencies as assets, they launched the first bitcoin futures at the very peak of the market, when bitcoin hit the $20,000 mark – December 17, 2017. Since the announcement of the launch, bitcoin rate began to grow rapidly and update its historical highs.

And now exactly after 3 years they are launching Ethereum futures, this event is quite important in the industry, as CME is called one of the key players in the cryptocurrency market, able to manipulate the bitcoin rate at the expense of large investor capital and now they will have access to Ethereum cryptocurrency.

Apparently, due to the high demand for crypto bull derivatives, the exchange has gone out of its way to expand access to digital assets.

According to CME’s website, one contract will be equal to 50 ETH, which means investors will have to pay $32,500 for it at the current rate.

CME Group head Tim McCourt expressed optimism that Ethereum futures will be as successful as their bitcoin futures contracts, which were launched exactly 3 years ago.

Tim McCourt believes that the addition of ethereum futures will provide clients with a valuable tool for trading and for hedging investments.

Of course, this news could not go unnoticed and the rate of the asset rose by 15% per day and, apparently, this is not the limit of its growth.

But if we remember the situation with bitcoin, the rate has similarly started to show good growth since the announcement of the launch of SME futures in late October 2017.

On this news, bitcoin was showing very dynamic growth in anticipation of large hedge funds and institutional investors coming to the market and contributing to the inflation of the next bubble.

Bitcoin’s capitalization rose from $106 billion to $330 billion in a month and a half, but a prolonged decline began the day BTC futures contracts started trading on the CME.

How the CME manipulates the bitcoin exchange rate

Let’s break down what happened during the launch of the first bitcoin futures and what we can expect from the launch of Ethereum contracts.

On December 15, CME launched two BTC futures contracts at $20500, which was the price above the spot market. One contract had a 3-month maturity with an expiration date of March 29, 2018 and the other had a six-month expiration date of June 29.

What do we see on the chart as the result?

Bitcoin collapsed from $20,000 to $12,000 in just the first week of trading. The three-month futures close and the drop was 67% from the peak values. Only after the contracts were expired, there was a rebound to $11,000. And you can find quite a few similar patterns in recent years.

Former CFTC head Christopher Giancarlo said that it was the Trump administration’s decision in 2017 to purposefully approve the launch of BTC futures on the CME Group in order to dramatically lower the bitcoin exchange rate. So as not to repeat the story of the mortgage crisis and this time reacted a little faster to the rising bitcoin.

One year ago we did a big article about this, if you are interested, you can read about it in details. There were many similar coincidences, when new semi-annual and annual contracts were launched, the bitcoin value was always either at the local maximum or at the minimum values, after which the market reversed.

What to expect from the launch of Ethereum futures?

So what can we expect from the launch of Ethereum futures? The same thing we saw with bitcoin. The growth of Ethereum before the start of trading on Chicago stock exchange will attract attention of many investors and then we will see how ETH reacts in the first days of trading and to what degree it will be decompressed when that event starts.

It will be much easier to breakup Ethereum, because of its small capitalization in comparison with bitcoin and other assets, which are traded on CME.

And of course, the scarcity of Ethereum tokens. More than 1.5 million tokens are blocked in Ethereum 2.0 depository contracts, as well as tens of millions are in decentralized financials, and several million more tokens are lost, creating a very significant shortage of ETH tokens right now.

We should also not forget about Grayscale, which increased its Ethereum Trust from 500k to almost 3 million Ethereum tokens in just one year, which is 2.5% of the total number of tokens in circulation.

Technical Analysis

Our friends at DoubleTopTraders also think that we’re in for a rise in Ethereum in terms of technical analysis.

They wrote that now it is best to consider Ethereum to the trading pair to bitcoin (ETH/BTC). On the daily chart, a pinpar was formed, also a triangle with a false break and you can see that Ethereum falsely broke through the msb level (breaking the bearish pattern) and seems to be fixing above it.

If Ethereum should rise to the bitcoin, when, if not now?

  • Entry 0.030100 on the current (14% x3)
  • Stop 0.029476
  • I do not place the tokens, but potentially on the chart 33-39-46-54, in time we will see
  • The risk of 1%.

Trading volumes

Daily bitcoin volumes on CME are from 50K to 100K BTC, that is equivalent to $1-2B, these are net trading volumes, because the exchange is actively controlled by SEC. Of course, these figures are lower than on Binance, but do not forget that the maximum leverage there is 2.5x in contrast to 125x on Binance, and allows a small group of large traders and accredited investors to trade. And the launch of ETH futures will also be well received by traders on the CME.

Results

Soon we will see semi-annual, three-month and even one-year Ethereum futures contracts from the world’s largest exchange. Then institutions will need to hedge their positions and will add options, and in a year or two we will see the long-awaited ETFs for both bitcoin and Ethereum. This is actually a very important step in the development of the cryptocurrency market, when such exchanges start to expand the list of cryptocurrencies and make them available to big investors, which allows big capital to enter the market.