ErisX, the Crypto Exchange platform, brings trading in ether (ETH) futures to the USAmaking it the second product in the country for cryptocurrency derivatives. The announcement came just days after Chicago-based TD Ameritade-backed ErisX received a digital currency license from New York’s financial regulators.
Bitcoin (BTC) futures trading was launched in 2017 Bitcoin futures trading with cash settlement will start with the Chicago Mercantile Exchange and the Chicago Stock Exchange Options Market. Since then, the CBOE has stopped its Bitcoin futures contract trading.
The news comes after a year of speculation about a possible debut of ETH futures on the US marketSome of the arguments for the possible start relate to the regulatory classification of Ethereum: whether ether tokens should be viewed as a commodity or as a value.
A senior official of the Securities and Exchange Commission has previously found that ether is not a security. Actually, The chairman of the Commodity Futures Trading Commission, Heath Tarbert, predicted that Ether Futures could enter the US market in 2020, Prediction that came true with the ErisX announcement.
The ErisX Ether Futures contract is a physically delivered futures contract product based on trading in ETH / USD pairs. According to an entry in the company’s blog announcing the launch, the schedule for trading in ETH futures is both monthly and quarterly.
In the case of physical settlement, the underlying ether tokens are actually exchanged for ETH futures on ErisX after the contracts have expired. Newly launched ether futures They are also operated in conjunction with the ETH platform’s spot trading marketThis could ensure transparency in pricing and an effective guarantee of operations. In an email to Cointelegraph, Thomas Chippas, CEO of ErisX, explained why physical delivery was chosen instead of cash settlement futures, and stated the following:
“A physically processed contract plays a unique role in the market. First, a physically executed contract reduces the basic risk: The buyer of the future receives the real asset underlying the derivative contract and no approximate amount of money derived from an index, which does not perfectly follow the price of the underlying. “
For chippas The need for solid pricing determined an important role in the exchange’s decision to physically settle an ETH futures contract and not in cash, despite additional shipping costs and brokerage fees. To explain it better, he added:
“”With our ETH contract, ETH holders can use this ETH as security By depositing with the clearing house and starting trading in cash-settled products, ETH holders must first convert ETH elsewhere into cash, which involves the risk and expense of the market, or must deposit cash to settle the contract To act in cash while the ETH still exists and to bear the costs and overheads of this inefficiency. “
According to ErisX, the newly launched ETH futures contracts will use the platform’s CLOB system (Central Limit Order Book). For ErisX The CLOB matchmaking engine tries to democratize the marketThis enables all participants to have the same access. An extract from the company’s blog explains the advantages of the CLOB engine:
“”With CLOBs, all participants can trade with each other without the need for new and exclusive agreements with each counterparty and ours The surveillance program prevents malicious activity. CLOBs are used in traditional product markets by using a comparison engine that uses a price-time comparison algorithm. “
Chippas, however did not rule out the possibility of creating an ETH futures contract product with cash settlement in the futureand added: “We believe that there is also a role for cash-settled products. In addition to potential ETH products, we have unique ideas we’re working on, and we hope to get them to market later this year, pending regulatory approval to bring. year “.
What about the ETH spot price?
When CBOE discussed a possible ETH futures contract at the end of 2018, some crypto commentators argued that such developments could have a significant impact on Ether’s spot price By introducing derivatives, traders can place long or short positions on an asset’s future price path. The crypto space has changed a bit since late 2018, but the same questions remain regarding the possible impact of trading ether futures on the asset’s spot price.
For David Grider, Senior Research Analyst at Fundstrat Global Advisors, The Ether Futures offering on ErisX is not an event for the underlying Ether Spot price. According to Grider, ErisX does not have enough liquidity for its futures contracts to have a significant impact on ETH prices, and told Cointelegraph:
“In the long run, one could say that futures have a negative impact on the price, as bullish investors no longer have to buy the underlying. You could also say that they offer bears a new way to cut prices: What We saw Bitcoin on December 17th but let’s not forget that we were on a big bubble back then, that’s not my opinion, my opinion is that Futures increase the liquidity of the market, which reduces the risk of the asset and has a positive effect on the valuations. Overall, it is good that Ethereum has opened up to the US, and I suspect that ETH’s trade demand will grow slowly over time, as was the case with BTC. “
Apart from this Futures trading offers investors the opportunity to take short positions – which, as crypto market analyst Mati Greenspan said in 2018, is a “critical component of pricing” – ETH futures at ErisX also serve to expand the visibility of Ether to a broader group of investors. Market participants who are not interested in holding the real asset can expose themselves to the Ether market by either buying or selling Ether’s future price.
If the trend seen on other derivative platforms like Bitfinex can be maintained, ErisX could present an overwhelming majority of long bets. As Cointelegraph has already reported, ETH Long bets on Bitfinex have become parabolic and have increased in volume since the beginning of the year.
Is ether ripe enough?
Given the volume of crypto market cap tied to ether Every significant change in the ETH rating in a short period of time often affects several crypto projects. The 2018 bear market effectively led to the death of the first coin fundraising model, which negatively impacted the valuation of various crypto startups.
Recently, the events of Black Thursday – when the price of ETH fell by around 50% – led to opportunistic speculation about MakerDAO. Amid a tidal wave of liquidations, the project would cause losses of approximately $ 6.65 million in Dai stable coins.
Related topics: MakerDAO is taking new measures to prevent the “black swan” from collapsing again
Aside from the possible price implications, the question of The maturity of ether as an asset also comes to the fore. Bitcoin’s market cap was over $ 300 billion when BTC futures debuted in the U.S. It has to be admitted that the main cryptocurrency, like others on the market, lost a significant part of its valuation at the end of 2017 and is now around $ 174 billion Ether’s market cap is only one-eighth that of Bitcoin, or about $ 22,000 million. Chippas commented on the maturity of ether as a commodity for futures trading in the US as follows:
“Ethereum has real features and use cases, with real people, businesses, and governments beginning to use the network. Ether’s market structure has many similarities to existing commodity markets, and we believe there are precedents and standards for these markets they can address Ether are applied. “
According to Chippas The introduction of ETH futures trading on ErisX will serve to improve the visibility of ether for investorsand added, “We believe that ether futures will bring one Increased market share, different business goals and time horizons, stronger and more resilient markets and better risk management tools, amongst other things”.
While ETH futures are being traded in the U.S. is now a reality Derivatives for other old coins could wait a long time. When asked about the possibility of the top 10 altcoins being approved by the CFTC for futures trading, Grider said:
“”Regulators do not allow trading in altcoins or other assets that they believe are very vulnerable to market manipulation in the United States. The real answer depends on the size of the market, the liquidity and the concentration of the fleet. Bitcoin and Ethereum are the two main crypto assets“”
Related: Ethereum developers strive for long-awaited scalability
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