Expert Takes: CME Group Launches Ethereum Futures

On Monday, the CME Group expanded their crypto derivatives offering by launching futures contracts for ether (ETH), the native cryptocurrency of the Ethereum blockchain network.

CME Ether futures are cash-settled, based on the CME CF Ether-Dollar Reference Rate, which serves as a once-a-day reference rate of the US dollar price of Ether. Ether futures are listed on and subject to the rules of CME.

According to CME Group, the addition of Ether, along with their liquid bitcoin futures and options, will create new opportunities for a broad array of clients, whether they are looking to hedge ether positions in the spot market or gain exposure to this cryptocurrency on a regulated derivatives marketplace.

Below is a series of expert reaction to the news, including explanations and predictions as to the impact of the launch.

Redmption, Harvest Finance Community Representative

“This will add to the perceived legitimacy of ETH, which will increase mainstream awareness and interest. It’ll also draw more eyes to the space and get a lot more people asking the question: what’s this DeFi stuff I keep hearing about?”

“With regards to the market, the potential impact is pretty uncertain as things stand, everyone thought institutions would enter BTC via CME but it took a long time to gain any meaningful traction. So much has changed since then however, just recently Greyscale have been upping their ETH activity.”

“Overall, it’s a great way for high net worth individuals and institutions to gain exposure to ETH in a way they’ll feel comfortable with. We’d expect this to increase the amounts pouring into ETH and deepen market liquidity.”

Kadan Stadelmann CTO of Komodo, an open source technology workshop and all-in-one blockchain solutions provider

“The launch of Ether futures trading by CME Group is the next step towards the adoption of cryptocurrencies in the institutional finance sector that we’ve been waiting for. When CME Group launched futures trading for Bitcoin in December 2017, the market was much different than it is today. The implementation of smart contracts technology was basically in its infancy, and much fewer people actually understood blockchain. Today we see how the Ethereum network has since become a global financial powerhouse with Ether at the center of it. Everything from decentralized exchanges to lending protocols to NFT marketplaces is currently running on the Ethereum network. CME Group, as well as other major institutions, are clearly bullish that cryptocurrencies and decentralized technologies will only gain more momentum in the coming years.”

“Bitcoin and Ethereum are obviously in a different stratosphere when looking at current crypto adoption, but I do believe this is only the beginning of futures trading expansion among large institutions. We will see more assets supported and more players in the mix. The entire crypto space has collectively begun to emerge as the global financial infrastructure that will one day replace legacy systems. The crypto space is truly unique in that it isn’t just one organization or a couple in the discussion. When we think of global e-commerce, the first name that comes to mind is Amazon or maybe even Alibaba. When we think of social media, there are only a few major platforms like Twitter, Facebook, and YouTube. I think crypto is much different and has the potential to become much more expansive than it already is. There are certainly big players, but hundreds if not thousands of projects have the ability to tangibly shape the future of the financial sector through decentralized technologies.”

“We’re still in the wild west era where anything can happen as institutional and mainstream finance begins to morph into the era of decentralized finance. It will be really interesting to see how both centralized futures trading and decentralized futures trading evolves. I envision there will be a day where institutions like CME Group that are built on centralized infrastructure today will launch decentralized protocols on top of existing blockchain networks.”

Martin Köppelmann, CEO at Gnosis – creators of Gnosis Protocol, a fully permissionless DEX that enables ring trades to maximize liquidity.

“Ethereum has repeatedly careened to All-Time-Highs over the past month, most recently topping out at $1,700, and analysts feel confident this upwards trend will continue. We have experienced this shift firsthand at Gnosis, as the assets stored in our Gnosis Safe Multisig wallet product ballooned from $1Billion to over $14Billion in just over a year.”

“It makes sense that derivatives marketplaces like CME would diversify to include Ether futures alongside the increasingly stalwart asset Bitcoin. The benefit is likely to be symbiotic, as listing on CME opens Ethereum’s door to institutional money, creating even more value—and trust—for the ecosystem. Futures buying from such institutional platforms enables access to more sophisticated financial products for Ethereum traders and institutions alike, as there is no longer the need to have a specific crypto brokerage account to gain exposure to this asset.“

Gunnar Jaerv, COO at First Digital Trust – a Hong Kong-based digital asset custody provider.

“The launch of Eth futures on CME could increase volatility of Eth price movements in the coming weeks. A few reasons could contribute to this – Institutions would be able to trade in large volumes as there is more interest in digital assets than ever before. When Bitcoin futures was launched on CME in 2017, the price of BTC dropped from 20k to 13k as a possible result of it. Furthermore, with Grayscale adding more Eth to their trust, we may see a further rise in institutional interest in digital asset futures, especially as no actual delivery of ETH occurs on the settlement date, which makes it easier for institutional players to participate as no digital asset custody is required.

Ultimately, CME adding another digital asset to its exchange alongside other traditional futures contracts in the market, is a good step in the right direction for the digital assets space.”

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