Why Ethereum CME futures will be affect by Eth2, DeFi and Bitcoin rates.

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Investors are worried that this week’s launch of CME ETH futures would be a replication of Bitcoin’s 2017 launch of CME, however evidence indicates otherwise.

Bitcoin’s (BTC) abysmal December 2017 futures launch rapidly fell short of investor expectations and even though the CME BTC market exceeded $2.5 billion in open interest, the initial launch reinforced the narrative that this week’s CME ETH futures launch will be similarly bearish in the short term.

Prior to the launch of CME’s BTC futures, Bitcoin had already won 1,900 per cent for the year, a surge that some analysts say was driven by hopes of controlled futures.

Now that the CME ETH futures have been launched, investors are watching closely to see whether Ether (ETH) will face a similar situation as it has already gained 600 per cent over the past year.

To date, there is no way to guess how Bitcoin would have gone without the presence of CME and CBOE futures. However, traders still appear to relate the launch of the CME to the 70% crash of the BTC price that occurred in the first 3 months after the launch.

Analyzing the product assortment and the launch of FX contracts over the past two decades might provide a better viewpoint on the matter, so we will study the data from the CME’s historic first trading date index to see if there is a discernible price pattern following the CME listings.

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Crude palm oil

Crude Palm Oil prices. Source: Worldbank.org

When the crude palm oil futures were launched at CME in May 2010, they did not affect its ongoing recovery of prices as indicated in the above-mentioned results. Similar contracts had already existed at NYMEX for almost a decade, but the above-mentioned case could have been of lesser significance as both exchanges deal with institutional clients.

Multiple factors may have caused palm oil prices to rise after the launch of the CME, including the 23 per cent positive output of WTI oil over the next five months.


South Korean won

In a similar sound, the South Koreans won futures listed in September 2006 and, in this case, the launch seemed to have an immediate effect on prices.

South Korean won / USD spot prices. Source: TradingView

Despite not having a futures contract, the non-delivery forwards (NDF) for the South Korean won already existed ahead of the CME listing. These NDF contracts are typically traded over-the-counter (OTC) and are rarely transferrable between investors. This indicates that the futures contract in question had a larger range of entities that could participate.

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Again, it is difficult to estimate whether the launch of this futures contract had an immediate price effect. It is likely that the devaluation gained by South Korea followed the pattern of emerging or Asian economies. It seems, therefore, a stretch to pin this trend to CME’s future launch.


How did commodities fare?

Both Ether and Bitcoin are generally considered to be limited digital assets, so it makes sense to equate it to other recent CME releases.

Back to commodities, Diammonium Phosphate (DAP), a commonly used fertiliser, made its CME futures contract debut in June 2004.


Diammonium phosphate (DAP) spot prices. Source: Worldbank.org

These contracts had been owned by the Chicago Board of Trade (CBOT) since 1991 prior to the launch of the CME. There is, however, possible proof of a market dumping ahead of the listing. However, for those evaluating a wider timeline, the list itself appeared to be a price driver rather than a negative one.

South African coal futures

South African coal spot prices. Source: Worldbank.org

Coal futures began trading at CME in July 2001 and, unlike the cases mentioned above, did not have a proxy on other exchanges. Similar to Bitcoin, a 50 percent hike has taken place over the year and a half before its debut.

The outcome is a reflection of Bitcoin’s listing, as the asset fell by 33 percent over the next 12 months.

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In conclusion, there is no fixed pattern that allows anlayts to predict assets output after the CME listing. A number of historical events have been associated, and no concrete trend has been identified.

Not every futures contract captures the relevant liquidity and the CBOE Bitcoin futures delisting proves this point.

It is fair to assume at this point that Ether’s future price performance would depend on a variety of factors, such as the performance of Eth2 and its critical position in the DeFi market.



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