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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 (BTC) Futures Killed The Crypto Rally in Early January, says Economist

It has long been suspected that the Bitcoin (BTC) Futures that went live back in mid December 2017, were the cause of BTC starting its gradual fall from its peak value of $20,000 to current levels of around $6,600. News reaching Ethereum World News indicate that an economist also believes that the BTC futures contracts were to blame for the decline.

In an article by Yukio Noguchi, who is the said economist who hails from Japan, the launch of Bitcoin futures was the turning point for the King of Crypto. Noguchi argues that it was no coincidence that BTC values fell once CBOE started offering BTC futures on the 10th of December, and the CME group on December 17th. He also painted a grim picture of the future when he stated that we will never see a rapid surge of the King of Crypto ever again.

Similar sentiments were echoed by the US Federal Reserve officials in a letter that stated the following:

Before December 2017, there was no market for bitcoin derivatives. This meant that it was extremely difficult, if not impossible, to bet on the decline in bitcoin price. Such bets usually take the form of short selling, that is selling an asset before buying it, forward or future contracts, swaps, or a combination.

The same letter stressed that betting on an increase in the value of BTC was easy. All you had to do was buy BTC and wait the value to go up. The letter goes on to add:

And until December 17, those investors were right: As with a self-fulfilling prophecy, optimists’ demand pushed the price of bitcoin up, energizing more people to join in and keep pushing up the price. The pessimists, however, had no mechanism available to put money behind their belief that the bitcoin price would collapse. So they were left to wait for their “I told you so” moment.

The pessimists now had the BTC futures.They could bet on the price decline. This introduced a new variable in the equation that is the value of BTC. New investors might have been turned off with this new betting mechanism of Futures contracts against a strong BTC. The demand for BTC fell and so did the price.

Evidence of this can be seen when some Bitcoin futures expired only a few days ago on the 29th of June. The price of BTC had dropped to $5,800 levels at the end of the day only to spike to $6,400 early Saturday. This means traders were waiting for the Futures contracts to expire so they can buy in. They held back their funds causing BTC to nosedive for a few hours.

One is left to wonder what damages futures contracts on Ethereum (ETH), Ripple (XRP), Litcoin (LTC) and Tron (TRX) will do to the digital assets. With respect to Tron futures, the crypto exchange known as Bitmex has recently started offering them due to public demand.

In conclusion, perhaps it is true that any futures contract on a digital asset is the beginning of the end of its capability to rally in a fast and furious manner in the crypto markets. This in turn means that the traditional financial instruments found in Wallstreet are harmful to the crypto markets.

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Top U.K Firm to Launch Litecoin (LTC) Futures

Back in mid May, Ethereum (ETH) Futures were launched by top U.K trading firm, Crypto Facilities. The same firm is now planning on offering Litecoin (LTC) futures. The report by CoinDesk indicate that the official announcement has not been made but the new investment product on the platform will be available as early as Friday, June 22nd.

The report also indicated that the new product will be offered against the United States Dollar on the platform. Investors will be able to long or short future contracts with Litecoin as the underlying asset as collateral.

The CEO of Crypto Facilities was quoted in the report as saying that:

We believe our LTC-dollar futures contracts will increase price transparency, liquidity and efficiency in the cryptocurrency markets.

However, news of any crypto based futures contracts have been met with mixed reactions by the crypto community for quite some time now. Referencing the past performance of Bitcoin when BTC Futures were offered by CBOE and CME back in December, many of the same crypto traders believe that the BTC futures are the cause of the current decline of Bitcoin to current low levels. Back in December, BTC reached levels of $20,000 only to start a decline the next day after BTC futures were offered by CBOE and CME. BTC continues to decline to this day and is currently trading at $6,662 at the moment of writing this.

The thought of offering Ethereum (ETH) contracts by CBOE was further explored by Ethereum World News when it listed the advantages and disadvantages of such a product after ETH was let off the hook by the SEC.

The first advantage of any crypto-based futures product, is the obvious feel by regular stock market investors, that digital assets are a formal means of investment. These Futures products legitimize the digital asset that backs them. This will then bring the institutional investors en masse into the crypto-verse leading to another rally similar or greater than the one experienced last December.

Two disadvantages of Ethereum futures by CBOE were also noted in the report by Ethereum World News. The first being that the price of Ethereum would enjoy a rally then a decline as was the case with Bitcoin. The second was that traders will learn from the case of Bitcoin, and short Ethereum. Shorting ETH means that the traders would flood the market with Ethereum and further cause a price dip.

In conclusion, the Litecoin futures are a welcome addition to the current products of XRP and BTC futures on the Crypto Facilities platform. Litecoin now gathers legitimacy as a viable investment option for regular stock market traders. Only time will tell of the impact such products have on the price of Litecoin in the future.

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Here Is Why Ethereum (ETH) Futures are A Double Edged Sword

The metaphor of something being a double edged sword might have originated in ancient Arabia when swords were the epitome of weaponry. Others might debate that it originated from the days of the Samurai in Japan. Whatever the origin of the metaphor, it means the same thing globally; that something has the potential for being favorable and also unfavorable. Picture the blade which is sharp on both ends. It is a threat to both the opponent and an inexperienced user.

The reason for the extensive explanation of the metaphor, is to give a clear picture of what the announcement by the CBOE President that the SEC decision to declare Ethereum (ETH) as not fitting the bill of being classified as a security, paves the way for ETH futures being offered by not only the CBOE (Chicago Board Options Exchange), but also other firms such as the CME Group.

Chris Concannon, the CBOE President had this to say about the SEC’s new stance on Ethereum:

We are pleased with the SEC’s decision to provide clarity with respect to current Ether transactions. 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.

So why is this a double edged sword?

Firstly, and referring to the past market reaction when BTC futures were announced as being offered by both CBOE and CME Group, Ethereum might rally to new highs as was the case with BTC right before December 17th when the BTC futures went live. Bitcoin was trading at $20,000 on the eve of the BTC Futures roll-out. A rally of Ethereum is very welcome.

Observing history once again, the price of BTC would then tumble through January and to the current levels we are seeing. Some have even pushed the theory that the BTC futures dragged down prices.

Therefore, Ethereum might experience a similar fate of a rally and decline as a result of the SEC giving an unofficial green-light for the offering of ETH futures.

Secondly, and using the past history of BTC futures, traders might use the history of BTC outlined above, and decide to short Ethereum. Shorting is the activity of borrowing an amount in stock, or in this case crypto, then immediately selling and hoping its price will decline. When it does so, the trader immediately buys the same amount at a cheaper price. He refunds the borrowed amount and keeps the difference in cash as profits.

Shorting will flood the markets with ETH leaving traders who want to go long, with no option than to sell or incur losses. This means that ETH will flood the markets and its price will tumble due to an over supply.

Thirdly, the ETH futures might give validity to the crypto-markets and bring in the institutional investors everyone is talking about. As they buy more crypto, the market capitalization of the entire crypto markets is sure to increase and so will the price of all our favorite coins and tokens. This means that we might be headed for the December and January levels once again.

In conclusion, the entry of ETH futures was expected and is a welcome proposal. This might end up benefiting Ethereum and the entire crypto-markets by bringing in institutional investors. The other side of the coin, is the two cases described where the value of Ethereum will first rise then tumble as was seen with Bitcoin in the past; and the second case where ETH will be shorted en mass, leading to its decline in value.

Disclaimer: This article is not meant to give financial advice. It is an opinion piece. The opinion herein should be taken as is. Please carry out your own research before investing in any of the numerous cryptocurrencies available.

[Photo source, buyblade.com]

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Ethereum (ETH) Futures Are Live and Could Be Key To $2,500 Per ETH By End Year

In a press release on the 11th of May, UK based Crypto trading platform, Crypto Facilities, launched Ethereum (ETH) Futures to bring greater efficiency and liquidity to the crypto markets. The new derivatives started trading on the platform as of 4pm UK time on the day of the announcement.

This means Crypto Facilities has 4 Crypto Futures products that include Bitcoin (BTC), Ripple (XRP) and now Ethereum. Ripple is the only asset with an extra product of Ripple to Bitcoin Futures on top of XRP/USD futures. This then adds up to 4 crypto futures products as earlier mentioned.

But what exactly is a Futures contract?

In traditional Stock market trading, A Futures contract is a legal agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future. Futures contracts are standardized to facilitate trading on a futures exchange and, depending on the underlying asset being traded, detail the quality and quantity of the commodity.

How will this move aid Ethereum’s value in the markets?

On May 1st, Ethereum World News had reported of a $2,500 Ethereum price prediction by the end of 2018 that was made by Nigel Green, founder and CEO of deVere Group. This is due to the fact that Ethereum has emerged as the platform of choice for new token issuers due to its efficient and popular smart contract capabilities. This means that once scalability is solved through sharding, Ethereum is sure to obliterate the competition in this aspect of the industry.

The same sentiment of the increasing popularity of Ethereum is the reason Crypto Facilities decided on creating the new derivative of ETH futures. The CEO of Crypto facilities, Timo Schlaefer, had this to say about Ethereum in the announcement aforementioned:

Ether is the second most liquid cryptocurrency after Bitcoin, trading in the billions of dollars daily, and we are excited to be launching ETH futures. The Ethereum network is the pre-eminent blockchain for smart contracts, and we believe this new trading instrument will attract more investors and bring greater liquidity to the marketplace.

This is good and bullish news about Ethereum: the King of Smart contracts.