The Chicago Mercantile Exchange (CME) has announced the launch of an ether futures contract on February 8, 2021.
Each ether futures contract is set to have 50 units of ETH and the derivative will trade between 5:00 p.m. and 4:00 p.m. CT from Sunday to Friday. The contracts are eligible to be exchanged for physical transactions, an official announcement reads.
This means that investors will be able to exchange a position in physical ether for a position in ether futures contracts, and vice-versa. The contracts will use the CME CF ether-dollar reference rate from CF Benchmarks, a crypto indices provider approved by the Federal Conduct Authority (FCA).
The exchange wrote:
Building on the success of bitcoin futures and options, CME Group will add ether futures to the cryptocurrency risk-management solutions available to trade in February.
Futures, it’s worth noting, are derivative financial contracts that obligate both parties to transact an underlying asset at a predetermined date for a specific price in the future. The buyer has to purchase or the seller has to sell the underlying asset, regardless of the market price of the asset at expiry.
The CME announced the launch of ether futures the day the price of bitcoin surpassed the $20,000 mark for the first time ever. The exchange launched its bitcoin futures contracts three years ago on the day the cryptocurrency hit its previous all-time high.
Popular crypto analyst Alex Kruger noted that while some people remember the CME launching its BTC futures product right before the previous crash, they “forget that the CME launch drove price from 6k to 20k.” Per the analyst, the launch of ether futures is “extremely bullish.”
Some market observers consider the CME’s trading volumes to be synonymous with institutional trading. According to CryptoCompare’s November 2200 Exchange Review, that month CME’s average open interest rose 62%, while its crypto derivatives volumes surged 76.8% to $17.1 billion.