CME Launches New Index for Ethereum, Says Futures Not in Plans
After dabbling its toes in cryptocurrencies by launching bitcoin futures in Mid-December 2017, CME is all set to pry on Ethereum. It launches two new indexes on Monday, which will track Ethereum- the second largest cryptocurrency in the world. This has fanned the speculations that the largest futures exchange could be looking into Ethereum futures as well.
The two indexes are CME CF Ether-Dollar Real-Time Index and the CME CF Ether-Dollar Reference Rate which will print a daily price at 4 p.m. London Time. The prices for both the indexes will be decided on data provided by Bitstamp and Kraken, two of the most significant cryptocurrency exchanges. The data will be processed by Crypto Facilities, based in the UK.
The company noted that it has no plans for a new crypto futures trade. Managing director and global head of equity products and alternative investments, Tim McCourt said, “The focus right now is on the index itself.” Experts thinks otherwise. The nature and structure of this new index is similar to the one CME uses for its bitcoin futures. Even though the company may want to keep its plans under wraps, it is highly likely that a new futures option will be introduces sooner or later.
In 2016, the company launched an index for bitcoin and after a year, it launched the first bitcoin futures contract in December 2017. Some experts called it a new era in crypto trading as futures contract could likely bring a slew of institutional investors in the game, pumping the prices higher than ever before. The move hasn’t paid off. In December, when the futures contract was launched, the prices hovered at $19,000. Since then, they have failed to pick up. On Monday, bitcoin traded at only $8,700, less than half of its launch price.
The trading in these futures was very sluggish as people were waiting for an eventual correction in prices. Now that it has arrived, traders are picking up pace and the volume reached a record high in April with more than 10,000 contracts. FactSet data suggests that a total of 5,000 contracts made up the composite volume of the futures trade in bitcoin on Monday, which is one-tenth of the total WTI crude futures volume.
Many industry hopefuls believe that the original digital currency still hasn’t reached its zenith. Estimates range from $20,000 to $40,000 by the end of the year. The lower and more stable prices now could help in increasing the volume further, which could lead to an eventual surge.
Ethereum traded for $730, shaving off 45 percent of its December gains, bringing a record high to the prices. Coinbase suggests that even after this downfall, it has the second largest market capitalization in the crypto industry.
Brian Quintez, a commissioner at the Commodity Futures Trading Commission said that ethereum is, “something that a few exchanges have expressed interest in listing derivatives on. The decision needs to be made carefully.” Speaking at the Consensus cryptocurrency conference on Monday, he hinted towards the possible derivatives trading on this coin, which is considered more stable and hence, more viable by many traditional financial institutions.