The United States Commodity Futures Trading Commission (CFTC) hasnt come to bury Ether, its come to regulate it. That was the message drawn from Heath Tarberts remarks from the stage at Yahoo Finances All Markets Summit in New York City on Oct. 10, which could have important consequences for the crypto and blockchain industry. He went on:
It is my view as Chairman of the CFTC that Ether is a commodity, and therefore it will be regulated under the CEA. And my guess is that you will see in the near future Ether-related futures contracts and other derivatives potentially traded.
Ether (ETH) the native cryptocurrency of the Ethereum ecosystem is a public, open-source blockchain-based platform that features smart contracts. As a commodity, Ether would be regulated in the U.S. by the CFTC; if it were found to be an investment, by contrast, it would be regulated by the Securities and Exchange Commission (SEC).
Hence the importance of a definition, whereby Bitcoin (BTC) is also a commodity in the view of U.S. regulators, its futures contracts have been traded since December 2017. Perianne Boring, CEO of the Chamber of Digital Commerce, told Cointelegraph that the chairmans pronouncement was incredibly important, adding:
The hint from Chairman Tarbert that ETH derivatives may be introduced soon are a sign of market maturity, and an encouraging step forward in recognizing the benefits of digital assets in this country.
It may be too early to gauge when the first Ether futures product will go to market. At this time, CME Group has no plans to introduce additional cryptocurrency futures, including Ether futures, a spokesperson for the owner of the Chicago Mercantile Exchange (CME) the largest player in the Bitcoin futures market told Cointelegraph, adding:
Right now, we are focused on bringing options on CME bitcoin futures to market in Q1 2020.
More futures trading tools could help the crypto industry attract institutional investors like mutual funds and hedge funds. Funds typically have investment constraints that allow them to only invest in specific assets for their portfolio, and this has inhibited them from investing in digital assets. But when a crypto futures contract is settled, investors are paid in U.S. dollars, not in BTC or ETH, which could make a difference.
Related: Are Trading Vehicles Dragging Crypto Into Maturity?
Mainstream investors, too, have avoided Bitcoin and Ether because of storage problems. If investors lose their private key, they lose their Bitcoin. Furthermore, custodians and brokers are now available that can take care of investing and storing, but fees for such services are often high. By investing in futures contracts, participants can bet for or against the price of the cryptocurrency without having to actually own or store it.
There is still not a lot of institutional interest in crypto, Lanre Sarumi, CEO of crypto asset derivative exchange Level Trading Field, told Cointelegraph. The exchanges believed if they built a Bitcoin futures product, the institutions would come, he said, but the response has been underwhelming. In March, for example, the Chicago Board Options Exchange (CBOE), the first U.S. exchange to introduce Bitcoin futures, announced that it would stop listing the product. Sarumi added:
Institutional investors appear to have found more attractive investment alternatives elsewhere, and Ether futures arent likely to fare any better. We are talking about Ether, the cryptocurrency, not Ethereum, the blockchain platform which continues to attract interest from institutions.
Meanwhile, Bitcoin futures contracts at CME averaged 5,534 contracts traded per day in the third quarter of 2019, up 10% from the same quarter in 2018, but down from the second quarter of 2019, the company told Cointelegraph, noting that institutional interest was building in the third quarter. Recently, CME has also notified the CFTC that it was raising the spot contract limit from 1,000 to 2,000.
Meanwhile, an offering form the Intercontinental Exchanges Bakkt platform had a record day on Oct. 9, with 224 Bitcoin future contracts with volume of $1.92 million. However, most days over the past two weeks (Sept. 24Oct. 15) have had a daily volume less than $1 million.
Futures are simply contracts to buy or sell a designated quantity of an asset at a specified price and date, and they are particularly useful when the underlying asset is volatile, which is the case with Bitcoin and to a lesser degree with Ether, as David L. Yermack, professor at NYU Stern, noted to Cointelegraph. These regulated futures contracts can help to stabilize the crypto market, he said:
"I dont see many differences in the economic rationales for Ether futures compared to Bitcoin. Ether has a lot less speculative trading volume, however, so it remains to be seen how much demand exists for Ether futures."
Questions remain, however: Will futures trading lead to financial manipulation or the cornering of the market? Some worry that the government is relying on profit-seeking exchanges (e.g., CME and CBOE) rather than the CFTC, a government regulator to self-certify new futures products, Indiana University professor Margaret Ryznar wrote.
Self-certification requires the exchange to prove that the new contract is not readily susceptible to manipulation, with Ryznar adding, Futures generally contribute to systemic risk, but distinctive features of Bitcoin futures heighten concerns.
Even though the SEC and CFTC seem to accept that both Bitcoin and Ether are commodities and not securities such clarity is not assured for the future. It seems to depend on the degree of decentralization at hand (i.e., the extent to which a cryptocurrency is controlled by a third party).
You can have a situation where something in an initial coin offering is a security, but over time, it gets more decentralized, and there's a tangible value there, so you can have things that change back and forth, Tarbert said. This may not be ideal, especially for institutional investors desiring regulatory predictability.
Spencer Bogart, head of research for Blockchain Capital, noted that shorting Bitcoin is "extremely risky" because there is no natural point, like priceearnings ratios, where people can tell if the cryptocurrency is over-valued. The same could presumably be said for Ether.
Indeed, the Futures Industry Association (FIA) has opined that Ether, more technically complex than Bitcoin because of its smart contract overlay, may be more difficult to risk manage. The FIA urged the CFTC to thoroughly vet any Ether derivative contract.
As noted, CME intends to launch a Bitcoin options product in the first quarter of 2020, pending regulatory review. While both futures and options are derivatives, they work differently. Futures commit a buyer to selling or buying the underlying asset at the previously agreed upon strike price.
Options, by comparison, are not obligatory; the option may never be exercised. Options are expected to be popular among Asian traders and miners, CMEs Tim McCourt said. Asked about the significance of Tarberts recent remarks, Sarumi said:
They are very significant. Any firm that was hesitating before now has a statement they can fall back on. But will it encourage institutional investors? I dont think so.
In his first public appearance as CFTC chairman, Tarbert also stressed the importance of blockchain and digital assets to the U.S., sweet music to digital evangelists like the Chamber of Digital Commerce. The U.S. has been falling behind in blockchain innovation, receiving little support from U.S. policymakers and regulators, Boring said, but here the chairman of the CFTC was saying, I want the United States to lead because whoever leads in this technology is going to end up writing the rules of the game.
Overall, it is fair to say that it has been a struggle for regulators and the exchanges to develop Bitcoin derivatives that are both safe and attractive to investors, especially institutions. Doing the same for technically complex Ether derivatives could be even more of a challenge.
The rest is here:
Ethereum Futures: The Next Big Derivative to Hit the Market? - Cointelegraph
- How does Ethereum work - Medium - February 3rd, 2018 [February 3rd, 2018]
- Ethereum - BTCMANAGER - February 19th, 2018 [February 19th, 2018]
- This Giant Infographic Compares Bitcoin, Ethereum, and ... - February 19th, 2018 [February 19th, 2018]
- What is Ethereum? | CryptoCompare.com - February 23rd, 2018 [February 23rd, 2018]
- The Top 10 Best Ethereum Wallets (2018 Edition) - February 23rd, 2018 [February 23rd, 2018]
- Ethereum fixes serious eclipse flaw that could be exploited ... - March 7th, 2018 [March 7th, 2018]
- How does Ethereum work, anyway? - Medium - April 25th, 2018 [April 25th, 2018]
- Free-Ethereum.com - Free Ether! - May 31st, 2018 [May 31st, 2018]
- What is Ethereum? | The Ultimate Beginners' Guide - June 20th, 2018 [June 20th, 2018]
- Ethereum Mining Guide for AMD and NVidia GPUs - Windows ... - June 20th, 2018 [June 20th, 2018]
- Ethereum: Blockchains, Digital Assets, Smart Contracts ... - July 16th, 2018 [July 16th, 2018]
- Ethereum Price - Mobile Friendly Price of Ether - July 16th, 2018 [July 16th, 2018]
- Ethereum Soars with over a 2,800% Rally - Coin News Asia - July 28th, 2018 [July 28th, 2018]
- Ethereum Co-Founder Joseph Lubin Says Speculators Driving ... - August 20th, 2018 [August 20th, 2018]
- Bitcoin and Ethereum: A Look At The Week Ahead - September 2nd, 2018 [September 2nd, 2018]
- EthereumPrice - Official Site - October 3rd, 2018 [October 3rd, 2018]
- Ethereum Classic Price Analysis: ETC/USD Could Revisit $12 - October 6th, 2018 [October 6th, 2018]
- Ethplorer Ethereum tokens explorer and data viewer. Top ... - October 6th, 2018 [October 6th, 2018]
- Buy and Sell Ether With The Peer-to-Peer Ethereum ... - October 6th, 2018 [October 6th, 2018]
- Ethereum Price - CoinDesk - October 18th, 2018 [October 18th, 2018]
- EthereumPrice.org - USD Price, Charts & History - October 18th, 2018 [October 18th, 2018]
- Report: Whales Accumulate Ethereum (ETH) En-Masse Amid Bear ... - December 7th, 2018 [December 7th, 2018]
- GitHub - ethereum/go-ethereum: Official Go implementation of ... - December 7th, 2018 [December 7th, 2018]
- Ethererum Crypto-Economics Index Real-time Price Charts and ... - December 7th, 2018 [December 7th, 2018]
- Ethereum Definition | Investopedia - December 7th, 2018 [December 7th, 2018]
- What is Ethereum Gas: Step-By-Step Guide - Blockgeeks - December 19th, 2018 [December 19th, 2018]
- Ethereum Price Analysis: ETH Could Extend Losses Below $80 ... - December 19th, 2018 [December 19th, 2018]
- Ethereum Price Analysis: ETH Could Turn Bullish Above $90 ... - December 19th, 2018 [December 19th, 2018]
- Bitcoin, Ethereum, Ripple Prices Surge Higher; FOMO Santa Rally? - December 26th, 2018 [December 26th, 2018]
- Ethereum Co-Founder Calls the Cryptobottom of 2018 ... - December 26th, 2018 [December 26th, 2018]
- Part 1: Ethereum vs NEO Which blockchain will provide ... - December 31st, 2018 [December 31st, 2018]
- Ethereum Price Analysis: ETH Corrects Sharply, Can It Hold ... - December 31st, 2018 [December 31st, 2018]
- Ethereum: JPMorgan, Microsoft, Banks Form ... - fortune.com - January 3rd, 2019 [January 3rd, 2019]
- Ethereum News | Ethereum News today | Latest Ethereum News - January 3rd, 2019 [January 3rd, 2019]
- Ethereum (ETH) - Price, Chart, Info | CryptoSlate - January 3rd, 2019 [January 3rd, 2019]
- Ethereum Cash Pro - January 3rd, 2019 [January 3rd, 2019]
- What Is Ethereum? Here's What You Need To Know - January 3rd, 2019 [January 3rd, 2019]
- What is Ethereum? | The Ultimate Beginners Guide - January 27th, 2019 [January 27th, 2019]
- Ethereum Classic - A smarter blockchain that takes digital ... - January 27th, 2019 [January 27th, 2019]
- Ethereum Price Analysis: ETH Relatively Muted, Next Move ... - January 27th, 2019 [January 27th, 2019]
- Buy and Sell Ether With The Peer-to-Peer Ethereum Marketplace ... - January 27th, 2019 [January 27th, 2019]
- What is Ethereum? | The Ultimate Beginners' Guide - CoinCentral - January 30th, 2019 [January 30th, 2019]
- Ethereum Price Analysis: ETH Breaks Down, Turned Sell on ... - January 30th, 2019 [January 30th, 2019]
- Ethereum Price Analysis: ETH Remains Sell Near $128 ... - March 6th, 2019 [March 6th, 2019]
- Ethereum Price Analysis: ETH Remains Sell Near $128, Target ... - March 11th, 2019 [March 11th, 2019]
- Create a cryptocurrency contract in Ethereum - March 11th, 2019 [March 11th, 2019]
- Ethereum Price Analysis: ETH Buyers Wont Give Up Easily ... - March 11th, 2019 [March 11th, 2019]
- Buy and Sell ETH With The Peer-to-Peer Ethereum Marketplace ... - March 18th, 2019 [March 18th, 2019]
- Ethereum Technical Analysis - FXStreet - March 18th, 2019 [March 18th, 2019]
- Ethereum - Investopedia - March 18th, 2019 [March 18th, 2019]
- Ethereum - reddit - March 18th, 2019 [March 18th, 2019]
- Ethereum vs Bitcoin: The Battle for the Crypto Throne - Coindoo - March 18th, 2019 [March 18th, 2019]
- Ethereum Price Analysis: ETH Could Make a Sustained Move ... - March 18th, 2019 [March 18th, 2019]
- Ethereum Project - March 18th, 2019 [March 18th, 2019]
- Ethereum - Official Site - April 20th, 2019 [April 20th, 2019]
- Ethereum (ETH) Price Starts Much Awaited Rebound To $170 - May 9th, 2019 [May 9th, 2019]
- Ethereum Price Analysis: ETH Corrects But More Upsides Likely ... - May 9th, 2019 [May 9th, 2019]
- Ethereum Price Analysis: ETH Primed For Additional Losses ... - May 9th, 2019 [May 9th, 2019]
- Ethereum Won't Fail: Joseph Lubin - ccn.com - May 9th, 2019 [May 9th, 2019]
- Ethereum (ETH) Price Starts Fresh Increase: Bitcoin Leading ... - May 9th, 2019 [May 9th, 2019]
- Bitcoin Booming As Ethereum, Ripple's XRP, EOS And Litecoin ... - May 9th, 2019 [May 9th, 2019]
- Ethereum Bounty Program - May 30th, 2019 [May 30th, 2019]
- Dark Horses of dApps: 6 Blockchains With Ethereum In Their Sights - Crypto Briefing - October 21st, 2019 [October 21st, 2019]
- Latin Americans get two new ways to trade Bitcoin, Ethereum, and more - Decrypt - October 21st, 2019 [October 21st, 2019]
- Ethereums Bearish Wave Count Outlined by Cryptocurrency Analyst - BeInCrypto - October 21st, 2019 [October 21st, 2019]
- XRPs Third Quarter Inflation Rate Was Lower Than Ethereum (ETH) and Litecoin (LTC) - SludgeFeed - October 21st, 2019 [October 21st, 2019]
- Ethereum (ETH) Dives To $170, Is $160 Next Bear Target? - newsBTC - October 21st, 2019 [October 21st, 2019]
- Thomson Reuters: Bringing Smart Contracts to the Mainstream With Ethereum & Chainlink - Blockonomi - October 21st, 2019 [October 21st, 2019]
- Crypto Analyst: Ethereum Has Bottomed, Expected To See Extended Rally - newsBTC - October 21st, 2019 [October 21st, 2019]
- WATCH: MyCrypto CEO Taylor Monahan on Crypto Adoption and Ethereum - Coindesk - October 21st, 2019 [October 21st, 2019]
- Cryptocurrency market update: Kicks of a dying horse as Bitcoin, Ethereum and Ripple remain suppressed - FXStreet - October 24th, 2019 [October 24th, 2019]
- Cryptocurrencies price prediction: Bitcoin, Ethereum & Litecoin - American Wrap - 22 October - FXStreet - October 24th, 2019 [October 24th, 2019]
- Ethereums gas prices show an unusual surge when the Asian market sleeps - AMBCrypto - October 24th, 2019 [October 24th, 2019]
- Whale Consolidates $88M Worth of Ethereum in Two Transactions - BeInCrypto - October 24th, 2019 [October 24th, 2019]
- Ethereum Falls 10% In Selloff - Yahoo Finance - October 24th, 2019 [October 24th, 2019]
- TRON Joins Bitcoin And Ethereum On Opera Browser - Crypto Briefing - October 24th, 2019 [October 24th, 2019]
- Ethereum (ETH) Rebound Faces Major Hurdle Near $180 - newsBTC - October 24th, 2019 [October 24th, 2019]
- Ethereum Breakout Above $360 Means Skys the Limit, Believes Cryptocurrency Analyst - BeInCrypto - October 24th, 2019 [October 24th, 2019]
- Ethereum and Stellars Lumen Daily Tech Analysis 23/10/19 - Yahoo Finance - October 24th, 2019 [October 24th, 2019]
- Why Bear Market Ethereum Futures Are a Better Bet That Bitcoins - newsBTC - October 24th, 2019 [October 24th, 2019]