Chicago Mercantile Exchange Launches Ethereum Futures. What Does It Mean?

By Gabriel Negrin

2020 was a great year for crypto. This has been particularly true for Ethereum which continues to rocket to new heights. This ever-growing crypto added another milestone to its history when the Chicago Mercantile Exchange (CME) decided to finally add Ethereum futures to its list of offerings. 

What Are Futures?

Futures are derivative financial contracts. They bind parties to buy and sell a specific asset in a specific amount and at a predetermined price.  All of this occurs at a certain date in the future. 

In these cases, the buyer must purchase or the seller must sell the underlying asset at the established price. It does not matter what the current market price is on the end date as these types of contracts allow traders to set the price of the underlying asset or product. They also provide the user with a sense of security, asset protection, and a risk-free experience. 

Why Now?

So why did the CME decide to add Ethereum futures three years after the launch of Bitcoin’s futures trading product? The reason is simple:

The average everyday investor wants more options. And due to the phenomenal pace at which Ethereum has grown, it was a given. 

In other words, they saw a huge opening in the market and jumped on it.

According to a CME representative, there has been significant growth in ETH trading. All this has happened since the launch of the CME CF ETH-dollar benchmark index and the real-time index in 2018. He also noted that there is an increased demand from clients for tools to manage price risk.

Back in 2018, The Chicago Mercantile Exchange decided to launch CF Ether-Dollar Reference Rate and Real-Time Index, providing users with an in-time standardized reference rate and spot price index. This was to give confidence to any trading strategy. It featured market data provided by Coinbase and Gemini at reliable and regulated rates.

The Perks of CME ETH Futures 

With the new Ether futures, the idea is to provide users with exposure to ETH. In this way, they can better manage their exposure to the price risk of the growing crypto. They will have the chance to trade on a regulated exchange and enjoy price discovery — a feature of transparent futures, where all users see the same prices. 

Users will no longer need to worry about checking different sites to be updated with prices. Rather, they’ll only need to check the price data provided by the main crypto exchanges. Similarly, they can also save on potential margin offsets with CME Ether Futures. This would also increase the efficiency of futures contracts.

Final Thoughts

According to the official announcement, these contracts will have 50 units of ETH. 

According to the CME representative, they decided to launch ether futures based on strong customer demand. He also assured that ETH’s futures would help investors cover their exposure in the cash market.

This product will be launched on February 8, 2021, subject to regulatory approval. It will be cash-settled and based on the company’s CF Ether-Dollar reference rate. This represents a major milestone for ETH and a bright future for 2021.

Tags : BlockchainChicagocryptoethereumFutures

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