Chicago Mercantile Exchange to change Ether-reference rate; ETH-Futures on the horizon?

  • 06 July 2019, Saturday, 09:00

If there is one true harbinger of the onrushing bulls in the cryptocurrency market, it’s regulated futures exchanges, particularly the last of the two initiators, the Chicago Mercantile Exchange [CME].

Hence, their possible leaning towards Ether Futures contract should be looked at with glee.

The CME group announced that the reference rate tied to the Ether-Dollar Reference Rate is set to change. The notice stated that the confirmation of the same will come about by July 15.

Three cryptocurrency exchanges have been included to prove pricing data for the Ether index in question, Bitstamp, Kraken, and itBit. The notice stated,

“Major cryptocurrency exchanges Bitstamp, Kraken, and itBit provide the pricing data to bring our dependable rate to the market.”

Although there was nothing apparent about the regulated futures exchange hinting at the possibility of an ETH-Futures contract, other sources emerged. According to The Block, the inclusion of itBit suggests that a derivative contract with the underlying asset being the second largest cryptocurrency could be a possibility.

The report quoted the source as saying,

“I think this is prep for an Ether future. They have to improve the robustness of their index.”

Volatility is a precursor in the cryptocurrency market, add onto that the lax-and betting-esque concept of a futures contract, could spell a ‘speculative disaster,’ for the cryptocurrency-futures market. Hence, the reliability of the data at the back of these contracts is pertinent to prevent price manipulation.

The source added that an “implicit limitation” of CME’s futures which are cash-settled is the need for “data from spot exchanges,” and credible ones at that.

Despite not giving anything away, the CME Group stated that they are ‘focused’ on their Ether Reference rate and Index, when questioned about ETH-Futures.

Futures contracts, especially those pegged on notable exchanges like CME and the late-Chicago Board of Options Exchange [CBOE], have come a long way since 2017. However, after their launch sparked the Bitcoin bull run, ending with Bitcoin close to $20,000, the aftermath has been brutal.

After an incredibly bearish 2018, spot markets as well as their futures’ counterpart turned for the better in 2019. The volume of XBT, the Bitcoin Futures contracts traded on the CME have been skyrocketing off-late. In the month of May, the average daily volume of XBT contracts on CME was over 13,600, a 250 percent growth since May 2018.