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Tom Lee: CBOE Ethereum Futures May Hurt ETH, But Benefit Bitcoin (BTC)

BTC Could Rise As A Result of Ethereum Futures

Even in a market downturn, development in this nascent industry rages, with firms continually releasing innovative products and services that could change the future of crypto. And as reported by Ethereum World News previously, the CBOE, the foremost US-based options exchange, is just months away from launching Ether futures that will be based on Gemini markets.

This news immediately sparked speculation about the effect this vehicle would have on the market, with many optimists noting that this futures contract should help to propel the price, development, and maturation of Ethereum, and subsequently, the growth of this industry.

While many agreed with this hope, Tom Lee, the head of research at Fundstrat Global Advisors, expects this news to benefit the price of Bitcoin (BTC) more than the price of Ethereum (ETH).

Speaking with Business Insider reporters, Lee, who has become well-known, if not near-infamous for his seemingly undying bullish sentiment on Bitcoin, noted that Ether futures will allow speculators to weigh down on the price of ETH.

His claims seem to be corroborated by the historical price action of Bitcoin following the initial CBOE and CME futures release. Since Bitcoin futures debuted in mid-December of last year, prices tanked, with Bitcoin briefly touching $20,000 before tumbling to $7,200 as it stands today. Some think thatEthereum Blockchain Token this is no unfortunate coincidence, but rather, the effect of short sellers placing bets against Bitcoin via the futures market.

As such, the Fundstrat Bitcoin bull then noted that the same effect, albeit likely not as drastic, could occur this time around as well, with the planned December 2018 introduction of the CBOE-backed Ether futures contract potentially lining up with a substantial decline in the price of ETH.

On the other hand, however, Lee added that the introduction of Ether futures may alleviate some of the pain placed on Bitcoin by bears, as the short interest may translate from the BTC contract to the ETH contract. The Fundstrat executive elaborated, stating:

“Since December of this year, if one was bearish on any aspect of crypto but did not want to own the underlying, they could short BTC. They can now short eth, means the net short on BTC in futures would fall.”

Some skeptics of this theory pointed out that it is somewhat counterintuitive, but upon thinking about it further, it is clear that Tom Lee’s thought does hold some credence at the very least.

Ethereum has already had a bad year, so many are hoping that the eventual introduction of these futures will not hamper the price of the asset further. But for now, only time will tell what the short to mid-term fate of the second largest crypto asset will be.

At the time of writing, Ethereum is down 1.4% in the past 24 hours, as it currently sits at $294 after falling from yesterday’s highs at $303.

ethereumImage Courtesy of TradingView.com

Photo by JESHOOTS.COM on Unsplash
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CBOE Ready to Launch Ethereum (ETH) Futures Trading This Year

The Chicago Board Options Exchange (CBOE) may be close to enabling the trading of futures for Ethereum (ETH) on its platform. This was revealed in a report from the specialized portal Business Insider, in which they mention that CBOE Global Markets, would be “ready” to make this business move soon.

According to undisclosed sources, the release of the futures is planned for the end of 2018. The futures are based on Gemini’s underlying market. This option follows the policies of the exchange which also did something similar with the Bitcoin (“BTC”) futures market which was launched in December 2017, also based on the famous exchange owned by the Winklevoss twins.

The launch of a futures market for Ethereum can be positive for the valuation of the token as it allows an increase in the trading volume by using a new financial instrument. Also, the support provided by the CBOE opens the doors to large investors to speculate with this popular cryptocurrency.

After the launch of futures in Bitcoin, this cryptocurrency began a bearish streak from which it has not been able to recover, however, the increased exposure to traditional markets is a favorable opportunity for any cryptocurrency.

Ethereum is NOT a Security

ETH TokenAccording to the Business Insider, a person with access to inside information told them that the CBOE would be waiting for approval from the Commodities Futures Trading Commission (CFTC) in order to successfully launch this project. The necessary preparations are already in place.

It is also important to highlight the legal safety of Ethereum futures trading. On June 14 a chairman at the Securities and Exchange Commission (SEC) concluded that Ethereum was not a security:

“Applying the disclosure regime of the federal securities laws to the offer and resale of Bitcoin would seem to add little value.[9] And putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.”

This decision was gratifying for traders and hodlers in general as the legal consequences of being classified as security could significantly disincentivize the markets.

In this regard, CBOE Global Markets president Chris Concannon commented on his satisfaction:

“This announcement clears a key stumbling block for Ether futures, the case for which we’ve been considering since we launched the first Bitcoin futures in December 2017.”

There is no exact date for the launch yet, but Ethereum’s fans have responded positively to the news despite not having the same immediate hyper-enthusiasm as when the announcement of the Bitcoin futures launch came out.

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Bitcoin Price Drop: Tom Lee Blames Expiring Futures Contract

Tom Lee has finally added his voice to the current Bitcoin price dip. The Fundstrat chief researcher said that the expiration of Bitcoin futures contracts might have caused the recent BTC price decline. The number cryptocurrency shaved more than $1,000 from its value in the last one week.

Relationship Between Expiring Bitcoin Futures and BTC Price

According to Lee, there is an apparent relationship between the expiration of Bitcoin futures and the price of BTC. BTC usually drops by an average of 18 percent in the ten days leading up to the expiry of Bitcoin futures. Lee also noted that the price typically rebounds six days after the contracts expire.

Lee revealed that there has a total of six expirations since Cboe launched its Bitcoin futures contracts. The most recent of these expirations was on June 13 which coincides with the current price plunge. On June 10, BTC took a considerable tumble, losing 10 percent in a matter of hours. In his June 14 report, Lee referred to Justin Saslaw’s theory and said that Bitcoin “falls into expiration.”

Thus, a trader goes long on Bitcoin but shorts futures when close to expiration date, they can earn a decent profit. According to Lee, this is because there is always a massive selloff at this time, causing the price drop and making the short position on futures highly profitable. Most holders will elect to sell at volume weighted average prices (VWAP) to reduce tracking error.

Both Cboe and CME launched their Bitcoin futures contracts in December 2017 in what was heralded as a big step for Bitcoin. The launch of these futures contracts coincided with a massive bull run for BTC that saw the price almost eclipse the $20,000 mark. Since the emergence of futures tied to BTC, calls have intensified for the introduction of Bitcoin ETFs. However, regulatory bodies like the United States SEC continue to delay approval.

An Intersection of Woes

The expiration of futures contracts may not be the only reason for the BTC price plunge. Lee admits that there has been a combination of factors leading to a “gut-wrenching” weakness in the number one cryptocurrency. According to Lee, the recent futures contracts expiration coincided with a period of low cryptocurrency liquidity and slow institutional adoption. Lee believes that there is more net supply in 2018 due to ICOs, capital gains taxes, and mining rewards. The slow pace of institutional tools has also slowed down the pace of Bitcoin’s growth.

In the midst of the decline, some commentators placed the blame for the BTC price plunge to the Coinrail hack and price manipulation. The Coinrail hack explanation has since been debunked seeing as the South Korea-based platform isn’t a major player in the market to cause such a significant decline. A recently published research paper by the University of Texas claimed that Bitcoin prices were inflated by manipulating the price of Tether (USDT).

Do you agree with Tom Lee’s position on expiring futures contracts being the cause of the latest BTC price plunge? Keep the conversation going in the comment section below.

Image courtesy of CoinMarketCap.

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Goldman Sachs To Offer Bitcoin (BTC) Futures

News reaching Ethereum World News indicate that global Investment banking giant, Goldman Sachs will start trading Bitcoin (BTC) futures. The investment firm will use its own money to trade the futures on behalf of its clients.

With most banks trying to distance themselves from cryptocurrencies, Goldman Sachs is taking the calculated risk of getting into the cryptucurrency industry. The firm plans to set up what has been seen as the first Bitcoin trading operation at a Wall Street bank.

This move by Goldman Sachs is what the crypto-verse has been looking for. When a big bank starts investing in Bitcoin, this means that cryptocurrencies have found some legitimacy with this announcement. This means that it is only a matter of time before other big investment banks and governments start embracing blockchain technology and cryptocurrencies.

A team at Goldman Sachs is looking at seeing if they can get regulatory approval and figure out how to deal with the additional risks associated with holding BTC and any cryptocurrency.

Rana Yared, a Goldman Sachs executive had this to say about the move:

“I would not describe myself as a true believer who wakes up thinking Bitcoin will take over the world. For almost every person involved, there has been personal skepticism brought to the table.”

This skepticism is normal for anyone who has been used to the traditional investing of stocks, bonds and real estate. The thought of encrypted digital cash on the blockchain being ‘peddled’ as currency is hard to embrace. We are so used of seeing the money in our hands or paper certificates of stocks and bonds.

The exact date of the offering of Bitcoin futures by Goldman Sachs has not yet been announced but the simple announcement is positive news and brings hope to a future where cryptocurrencies will be embraced and adopted 100% by individuals and financial institutions.

Other financial institutions offering Bitcoin futures are Cboe and CME group.

Traditional futures are defined as financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash.