CME Ethereum Futures Out, Data Suggests Eager Investors Should Calm Down


The lousy launch of Bitcoin (BTC) futures in December 2017 did not quickly catch up with investors’ expectations And, although CME’s BTC market has surpassed $ 2.5 billion in open interest, The initial launch has reinforced the narrative that this week’s CME ETH futures launch will be similarly bearish in the short term.

Before the launch of CME’s BTC futures, Bitcoin had already gained 1,900% on the year, a movement that, according to some analysts, was driven by the expectation of regulated futures.

Now that the CME ETH futures have been released, Investors are watching closely whether Ether (ETH) will face a similar situation, having gained 600% in the last year.

To date, there is no way to estimate how Bitcoin would have fared without the existence of the CME and CBOE futures. Nevertheless, traders still tend to associate the launch of CME with the 70% drop in the price of BTC that occurred in the first three months after launch.

Analyzing an assortment of commodity and currency contract launches over the past two decades could offer a better perspective on the matter, so we will review the CME early trading dates historical index data to see if there is a discernible price trend occurring after the CME listings.

Crude palm oil

Crude palm oil prices. Source: Worldbank.org

When crude palm oil futures were launched on CME in May 2010, they did not affect their ongoing price recovery, as previous data indicates.. Similar contracts have already existed for almost a decade on the NYMEX, so the previous event could have been less important, as both exchanges handle institutional clients.

Multiple factors could have triggered the rise in palm oil prices following the launch of CME, including the positive performance of 23% of the WTI oil in the following five months.

The South Korean won

In a similar tone, South Korean won futures traded in September 2006, and in this case, the launch appeared to have an immediate impact on the price.

South Korean won / USD spot prices. Source: TradingView

Despite not having a futures contract, no-delivery forward (NDF) contracts for the South Korean won already existed prior to listing on CME. These NDF contracts are typically traded over the counter (OTC) and they are rarely transferable between investors. This means that the listed futures contract had a larger number of institutions that could participate.

Once again, it is impossible to estimate whether the launch of this futures contract had an immediate impact on the price. It is possible that the devaluation of the South Korean won followed the trend of emerging or Asian economies. Therefore, attributing this move to the CME futures launch seems like an overstatement.

How did the raw materials behave?

Both Ether and Bitcoin are often considered scarce digital commodities, so it makes sense to compare it to other previous CME releases.

Returning to the raw materials, diammonium phosphate (DAP), a widely used fertilizer, debuted on CME futures contracts in June 2004.

Diammonium phosphate (DAP) spot prices. Source: Worldbank.org

Prior to the launch of CME, the Chicago Board of Trade (CBOT) had held these contracts since 1991. Nevertheless, there are signs of a possible price drop before listing. However, for those analyzing a broader time frame, the price itself seemed like a price catalyst rather than a negative.

South African Coal Futures

South African Coal Spot Prices. Source: Worldbank.org

Coal futures began trading in July 2001 on CME And unlike the previous examples, they didn’t have a substitute listed on other exchanges. Like Bitcoin, there was a 50% rise in the year and a half that preceded its debut..

The result mimics the price of Bitcoin, since the raw material fell 33% during the following twelve months.

In conclusion, There is no fixed trend to predict the performance of an asset after its listing on CME. Multiple historical events have lined up and no concrete pattern was found.

Not all futures contracts have relevant liquidity and the delisting of the CBOE’s Bitcoin futures proves this point.

At this point, it is safe to conclude that the future evolution of the price of Ether will depend on a number of factors such as the performance of Eth2 and its crucial role in the DeFi sector..

The views and opinions expressed here are solely those of the carr and do not necessarily reflect the views of Cointelegraph. All investment and commercial movement involves a risk. You must do your own research when making a decision.

Keep reading:





Source link

Comments

0 comments