The CBOE intends to launch ETH futures, and there are mixed expectations about it in the market. Looking back, the launch of the BTC futures in December 2017 saw the price of bitcoin shoot up from around $7000 to its all-time highs of $20,000. However, what followed was a downward spiral that saw bitcoin drop below $6000. But for those who caught that wave at the top, it was a profitable moment. As such, a replica of the same with Ethereum (ETH) could give great gains to investors.
The only difference is that the market conditions are quite different right now. The launch of the BTC futures came at a time there was a huge buying pressure in the crypto markets. Crypto was already in a bull run. Bitcoin had pumped from a low of $1000 to around $7000 before the futures launched.
The ETF simply added a catalyst to a market that was already on the rise. Today, Ethereum is trading under a different set of circumstances. It is now trading at under $300 from a high of over $1000 earlier in the year. New investors that were flocking the markets in 2017 got burnt, which explains the low volumes in the markets nowadays. As such, an Ethereum futures launch would most likely not draw in as much volumes as the Bitcoin futures did last year.
On top of that, futures don’t require investors to own the underlying asset, yet they can bet against it. Under current market conditions, there is a huge incentive for people to use the futures market to short Ethereum (ETH). That’s because Ethereum has many unresolved issues, especially those to do with scalability. Besides, it is currently facing lots of downward pressure due to ICO selling Ethereum (ETH) to cut their losses, after the recent market drop. This incentivizes futures traders to short Ethereum, and this could drive the price below $200. Clearly, an ETH is the last thing Ethereum needs right now.
The best move would be an Ethereum ETF. That’s because in ETFs, investors actually buy the underlying asset. As such, an ETF could draw in institutional buyers, thus pushing up the price. That’s why there was so much market expectation around the Bitcoin ETF, before the SEC cast doubts on the same.
The futures are not something that investors should possibly be excited about. The risks to the price especially in a bear market are significant.