Why is ETH recovering?

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The price of Ether (ETH), Ethereum’s native cryptocurrency, hit a new all-time high on February 9, 2021. On Binance, ETH rose to $ 1,830 just a few hours after starting CME trading.

ETH / USDT 15-minute candle price table (Binance). Source: TradingView.com

Why is the ETH rally important according to the CME listing?

The timing of the ETH rally to a new record high is remarkable given the negative sentiment before the listing.

In December 2017, CME first listed the Bitcoin futures contract. Within a few weeks, the price of Bitcoin plummeted from USD 20,000 to around USD 6,000.

Many traders and analysts had expected ETH to fall similarly to BTC after Bitcoin futures went live on CME in December 2017.

However, there are two misconceptions about this theory. First, there is no way to prove that the CME Bitcoin futures listing was the catalyst that caused BTC to collapse in the weeks that followed.

Second, other than this unprovable theory, there is no clear reason to view ETH’s CME listing as a bearish event.

The difference between 2021 and 2017 is that there is unprecedented institutional demand for ethers and cryptocurrencies in general. As Cointelegraph reported, Tesla bought $ 1.5 billion worth of Bitcoin, which is nearly 10% of its cash holdings.

There is a great chance that institutional demand for Bitcoin will translate into increased demand for ETH. In this sense, the CME listing could be an important catalyst for Ethereum in the long term.

Ryan Seans Adams, an investor and researcher at Ethereum, said:

“ETH futures are going live on the CME today. It’s huge. This is a bridge to institutions. This is a green light from US regulators. The ETH is becoming a globally accepted commodity money. “

The CME listing will be a catalyst for Ethereum

Researchers on the CoinMetrics team said in a note that they believe the launch of the CMTH-ETH futures could accelerate the inflow of ETH into the Grayscale Ethereum Trust (ETHE).

If the institutional appetite for Ethereum rises as a result, and grayscale inflows rise, it would likely cause both short-term and long-term sentiment around ETH to improve rapidly. The researchers said:

“The introduction of CME can potentially accelerate ETH inflows into Grayscale’s Ethereum Trust (ETHE). Investors can buy into the Grayscale Trust and at the same time short-circuit the ETH, remain market neutral and pocket the ETHE premium. Grayscale’s Ethereum trust does not currently have a method of withdrawing ETH, so it effectively serves as a large token sink for ETH. “

Analysts at Arcane Research found that the ETH futures contract hit a daily volume of $ 30 million on day one, which is relatively high.

CME ETH futures volume. Source: Arcane Research

If the volume continued to grow, it would show that institutions also view ETH as a potential investment. The analysts said:

“Start of ETH futures on @CMEGroup Bank. The first day of trading for the ETH futures from CME ended with a volume of over 30 million US dollars and an open interest of 20 million US dollars.”