Today is the day that the Chicago Mercantile Exchange (CME) launches its long-awaited Ethereum futures contracts.
As the asset cools from its recent all-time high, industry analysts and experts weigh in on what this could mean for markets and Ethereum prices.
To understand the potential impact a major institutional exchange launching a futures product could have, we have to go back to the end of 2017 when Bitcoin was approaching its all-time high of $20,000.
The CME and Chicago Board Options Exchange (CBOE) launched Bitcoin futures contracts in December 2017, and on the 16th of that month, BTC reached its peak price ending a bull market that lasted for over a year.
For the first time, institutional traders could gain exposure to Bitcoin and short the asset, which they did en-masse causing a massive market slump that accelerated and resulted in BTC dropping 84% to $3,200 by the end of 2018.
ETH to follow suit?
Fast forward to 2021 and the CME is poised to launch a similar product for Ethereum, which has also just hit its highest ever price above $1,700 on Friday, Feb. 5. Popular crypto trader and analyst “Crypto Whale” posted a stark comparison of the two charts stating that now is not the time to buy into this and bull markets eventually end.
Not all are so bearish, however.
Researcher at crypto analytics provider Messari, Ryan Watkins, took the opposite view stating that market conditions are very different this time around.
“Fear of the upcoming ETH CME futures launch is ridiculous. Not only does that fear stem from just one data point, but there’s also clear differences between market conditions in December 2017 and market conditions now. Also don’t think institutions are itching to short ETH…”
Ethereum is used for so much more now than back then when it was primarily a vehicle for raising money for initial coin offerings (ICOs). There is over 7.5 million ETH ($12 billion at current prices) locked into decentralized finance protocols, and almost 3 million ETH ($4.8 billion) locked into the ETH 2.0 Beacon Chain staking contract.
Institutions such as Grayscale have been also been buying up the asset and it is unlikely that they will be selling in a hurry.
Ethereum price outlook
At the time of writing ETH prices were trading just above $1,620 following a weekend retreat below $1,500. It is still hovering around its highest ever prices so there may be a minor correction but the long-term outlook is still bullish for Ethereum, regardless of the futures impact.
DeFi Alliance partner and industry observer Qiao Wang is standing by his big predictions for ETH prices by the end of 2021;