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Ethereum hits all-time high, futures launch on the horizon

CryptocurrencyFeb 03, 2021 15:39
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By Samuel Indyk

Investing.com – Cryptocurrency Ethereum hit an all-time high on Wednesday as markets position themselves ahead of the Chicago Mercantile Exchange (CME) launch of Ethereum futures next week. The futures product listed on the CME goes live at the beginning of trading on Sunday evening.

The second-largest cryptocurrency by market capitalisation breached $1,500 on Tuesday and has continued its march higher today, rising over 9% ahead of the futures launch. The listing gives those trading and investing in Ethereum more confidence that the cryptocurrency space is one that is safe to invest in. {{|JPMorgan}} analysts also note that it allows users to gain exposure to Ethereum as a diversifier to Bitcoin and gives investors the option to hedge existing Ethereum exposures.

Bitcoin futures

Ethereum futures will be the second crypto-based futures product after the first Bitcoin contract launched three years ago. The launch of the product will likely see options on Ethereum futures launch at some point in the future, in a similar manner to how bitcoin options were launched at the beginning of last year.

When Bitcoin Futures were launched, the Bitcoin price peaked. The Federal Reserve Bank of San Francisco noted that the decline after the launch of the futures contract did not appear to be a coincidence. “With the introduction of Bitcoin futures, pessimists could bet on a Bitcoin price decline, buying and selling contracts with a lower delivery price in the future than the spot price,” the FRBSF said in a research note. “With offers of future Bitcoin deliveries at a lower price coming through, the order flow necessarily put downward pressure on the spot price as well.”

They concluded that the run up in prices before and then the decline of the price of Bitcoin following issuance of futures on the CME was consistent with pricing dynamics suggested elsewhere in financial theory. Markets will be looking to see if the launch of Ethereum futures will coincide with a drop off in price after the strong performance over the last year.

Both Bitcoin and Ethereum have shown extraordinarily strong gains over the last 12 months. Bitcoin is up around 300% in the last year, hitting a high above $40,000 in January. Ethereum has outperformed its larger cousin, rising around 700% in the last 12 months to its current price above $1,500.

Readers of UK.investing.com are optimistic that Bitcoin will continue its meteoric rise. In a recent survey, over 60% of UK investors said they believe the cryptocurrency will rise above $60,000 this year.

Ethereum hits all-time high, futures launch on the horizon
 

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