By Josiah Wilmoth
The first ethereum futures contracts will likely be trading on a regulated U.S. derivatives exchange within the very near future, providing the second-largest cryptocurrency with its first exposure to the institutional markets.
Ethereum Futures on the Horizon
The launch of bitcoin futures on U.S. exchanges Cboe and CME is expected to be a watershed event, introducing a wave of liquidity to the bitcoin ecosystem and transforming bitcoin into a mainstream financial instrument and portfolio asset. However, analysts who follow the industry closely believe that the ripple effect of these futures contracts will spill over into the broader cryptoasset markets.
Speaking with financial news network Cheddar, Ethereum co-founder Joseph Lubin hailed the advent of bitcoin futures as validation of not just bitcoin but also the fundamental nature of cryptocurrency itself.
“I think it signifies that real financial institutions are taking this new form of money or commodity very seriously, Lubin said, forecasting that the SEC will approve cryptoasset-based ETFs in the near future.
Lubin, who also founded blockchain software development company ConsenSys, then went a step further, suggesting that there would soon be ETFs for not only bitcoin but also ethereum. Given that the SEC’s chief objection to bitcoin ETFs has been that the fund’s proposed base products — bitcoin futures — do not currently exist, this signaled that Lubin believed that ethereum futures were looming on the horizon.
When pressed to give an exact date, he demurred, although he hinted that “months would be a long, long time” to wait for the release of this product.
Cryptocurrency as an Asset Class
This should not be surprising because although bitcoin is the dominant cryptocurrency by almost every metric, it is but the first standout in an emerging asset class.
The development and release of cryptocurrency derivatives will likely chart a course similar to another asset class to which it is often compared: metals.
Following this year’s dramatic ascent, as well as its resilience in the face of hostile government regulators and contentious splits in the development community, bitcoin has earned the moniker “digital gold”. Like gold, bitcoin is a store of value — one built specifically for use in the digital economy.
But futures markets would be considerably thinner if they restricted themselves to the most valuable commodity in an asset class. Precious metals such as platinum, silver, and palladium trade prominently at most futures exchanges, as do industrial and base metals such as iron, steel, and aluminum.
Similarly, as cryptoassets continue to grow and mature into an established asset class, exchanges are certain to broaden their cryptoasset offerings to include a range of options, likely beginning with the “precious metal equivalents” such as ethereum and litecoin but eventually expanding to include utility tokens — the “industrial metals” of the digital ecosystem.
As the second-largest cryptocurrency by both market cap and infrastructure, it is almost certain that ethereum will be the next cryptocurrency to be wrapped in derivatives on a regulated exchange.
Will Cboe Win the Race to List Ethereum Futures — Or Someone Else?
This begs the question: What exchange will be the first to list ethereum futures? There’s a strong case that it will be Cboe. Not only did Cboe win the race to list the first bitcoin futures product, but Chris Concannon, the exchange operator’s president, has hinted that Cboe desires to launch a family of cryptocurrency products as the market matures, beginning with bitcoin cash and ethereum futures.
Moreover, Cboe prices its bitcoin futures based on data from Gemini, a New York-based cryptocurrency exchange founded by bitcoin billionaires Tyler and Cameron Winklevoss. Gemini also supports ether trading, so it seems likely that the two companies could leverage their current relationship to bring ethereum futures to market ahead of the competition.
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