Are Ethereum the next Cryptocurrency futures?
Ethereum (ETH) prices briefly topped the $753 territory on Thursday before retreating somewhat, marking yet another all-time high for the world’s second largest cryptocurrency by market capitalization. At the time of writing, ETH is trading near the $680 handle, which marks a 58% surge since Monday. What has been driving this astonishing rally, and is it likely to continue still?
The latest spike in prices can be attributed to a variety of factors, but probably none more important than the launch of Bitcoin futures on the Cboe earlier this week. The move was widely perceived by the financial community as a step towards making not just Bitcoin, but cryptocurrencies in general, more legitimate as an asset class. For Bitcoin, the futures launch means a dramatic expansion in liquidity, and a gradual transformation into an asset that can be more easily included in an institutional investment portfolio, if so desired. What does it imply for Ethereum though?
In short – it paves the way for Ethereum futures to be launched at some point in the foreseeable, and perhaps near, future. With Ethereum being the second largest cryptocurrency after Bitcoin – both by market capitalization and popularity – it only makes sense that ETH will be next in line to see the launch of future contracts. Indeed, shortly after the Cboe first announced it will roll out Bitcoin futures, the group’s President, Chris Concannon, hinted at the prospect of more cryptocurrency futures, including ones for Ethereum and Bitcoin Cash.
What would such an announcement mean for Ethereum prices, and how much of the “good news” is likely priced in already? Although some expectations for such an action are likely factored into ETH already, it is still very far from being certain and as such, prices could still skyrocket in case of an official announcement by a major exchange like the Cboe or CME. If Bitcoin’s behavior after the Cboe’s futures-announcement is any indication to go by, then we could see price gains in the magnitude of 50% from current levels. For reference, Bitcoin is now 57% higher than when the Cboe announced the date of its futures-launch, on December 4th.
Technically, Ethereum/dollar could initially target the 845 territory and subsequently, the psychological area of 1000, marked respectively by the 161.8 and the 261.8 Fibonacci levels of the latest correction lower, with a high at 753 and a low at 606. All the above said, it is worth noting that Ethereum’s forthcoming direction may also depend to a large degree on Bitcoin’s path, with any potential correction lower in Bitcoin likely to drag Ethereum down as well, even despite the positive prospects for an ETH futures listing.
by Melina Deltas, XM Investment Research Desk