Ethereum futures are coming in weeks not months according to unnamed sources, one of whom said: “I think we can get comfortable with an ether derivative being under our jurisdiction.”
“If they came to us with a particular derivative that met our requirements, I think that there’s a good chance that it would be self-certified by us,” the senior official added.
Meaning eth is now following bitcoin to Wall Street with these futures likely being cash settled whereby eth itself is not directly touched.
The physically settled bitcoin futures by Bakkt are still going through the process, so that too might be coming, but what might happen in the run up to eth futures and after they launch?
Obviously we don’t know for sure, but for bitcoin, price went parabolic in the weeks ahead of futures, with it then diving in the months after.
Why? There are many theories. Futures may have had nothing to do with the run-up. There was a lot more going on, a lot, but wall street might have been buying physical bitcoin before hand to hedge the fiat bitcoin futures.
Likewise the December crash might have had nothing to do with futures. Bitcoin just went up too high, too fast, so come Christmas, everyone cashed in. This Christmas the opposite happened, everyone cashed on because presumably they thought it was undervalued.
Alternatively, you can easily blame futures for everything. Wall Street manipulators rigging prices. Except bitcoin doesn’t have a secret room where they set prices, like they do with gold and other commodities.
So, on probabilities, it is likely there was already a rush to bitcoin in November, with futures adding to that overall narrative of bitcoin debuting to the mainstream in the United States.
Then in December there was some general feeling that prices had gone too high with quite a few prominent cryptonians publicly announcing they sold.
Futures then probably added a bit in both directions, with the question being how will eth be affected once futures are announced?
Unlike bitcoin, eth is not the first. So while for bitcoin there was plenty of discussion in the run-up, for eth there might be less because eth futures are not as novel.
Whether that matters remains to be seen. The dynamics, however, are likely to be different.
Wall Street for now only has bitcoin as a choice where there are legal restrictions on buying the underlying asset. They soon might have two choices.
Some of that volume that goes towards bitcoin, therefore, might go towards eth. In addition, traders and brokers might need some actual eth to hedge, otherwise futures could become completely detached and irrelevant.
Price therefore might be affected, but indirectly. As new markets are open and new trading volumes enter eth, that could bring in new demand which would probably eventually be reflected in the underlying price.
In addition, eth futures would pave the way for institutional investors to enter the market because ethereum would then sort of become regulated.
CFTC would have jurisdiction to investigate spot exchanges where there is any suspected price manipulation and so on. Meaning institutional investors might feel more comfortable buying eth as it would become a sort of proper asset from their point of view.
That can matter a lot because ethereum would then be able to enter all the new markets that are now being opened to bitcoin, with Fidelity just revealing they’re to start bitcoin trading.
SEC also has kind of demanded such futures if they are to allow an ETF that paves the way for pension funds to directly buy the underlying asset in a regulated form.
Such futures would also cement eth’s position as different from the rest, as sort of more trusted. There would be bitcoin, eth, and then all the rest at least for probably a year or more.
That could pave the way for considerable integration with the traditional financial system which would have a choice and would be able to offer a choice between bitcoin and eth.
So futures can be a big deal because it would give ethereum regulatory certainty and it would be ethereum’s debut as a new asset class.
So what might happen? Well, there’s probably three scenarios in the short term once futures are announced or in expectation of it.
Price might move up as Wall Street buys, like they arguably did with bitcoin. Then once futures launch it would probably depend on just how much it has moved up and what else is going on.
Alternatively, price might not care at all, even after futures are announced. Then once they actually launch, eth starts moving up due to presumably new demand.
Obviously it might not, it might even go down either in the run-up or after launch. As far as probabilities go, however, that seems unlikely because it is a new market that opens access to new investors. Yet it is also a new way of shorting.
So anything could happen. We’re not going to say what we think due to the contrarian indicator. Except that whether you like them or not, regulated futures are a big step for eth.
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