Here’s how the Eth2, DeFi, and Bitcoin price affect Ethereum’s CME futures

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Bitcoin’s miserable futures (BTC) launch in December 2017 quickly fell short of investor expectations, and although the CME-BTC market surpassed an open interest of $ 2.5 billion, the initial launch bolstered the proposition that the launch of the CME-ETH futures this week in the US will be equally bearish in the short term.

Before the CME BTC futures launch, Bitcoin had already gained 1,900% for the year, a rally that some analysts believe was fueled by the expectation of regulated futures.

After the start of the CME ETH Futures, investors are watching closely whether Ether (ETH) will face a similar situation, as it has already gained 600% in the past year.

To this day, there is no way of knowing how Bitcoin would have fared without the existence of the CME and CBOE futures. Still, traders still tend to associate the CME launch with the 70% drop in BTC price that occurred in the first three months after launch.

Analysis of a number of commodity and foreign currency contract launches over the past two decades could provide a better perspective. Therefore, we will review data from the historical index of the first trading dates of the CME to see if there is a discernible price trend following CME listings.

Raw palm oil

Crude palm oil prices. Source: Worldbank.org

When CME crude palm oil futures entered the market in May 2010, they had no impact on the ongoing price recovery, as can be seen from the data above. Similar contracts had been in place with NYMEX for nearly a decade, so the above event may have been of lesser importance as both exchanges serve institutional clients.

Several factors could have caused palm oil prices to rise after the CME launch, including WTI oil’s positive performance of 23% over the next five months.

South Korea won

On a similar tone, the South Korean won the September 2006 listed futures, and in this case the launch appeared to have an immediate impact on the price.

South Korean Won / USD spot prices. Source: TradingView

Although there is no futures contract, there were non-deliverable forwards (NDF) for the South Korean won even before the CME listing. These NDF contracts are usually traded over the counter (OTC) and are rarely transferable between investors. This means that the listed futures contract had a greater number of institutions that could participate.

Here, too, it is not possible to assess whether the introduction of this futures contract has had a direct effect on the price. It is possible that the South Korean won devaluation followed the trend of emerging or Asian economies. Hence, it seems like a stretch to pin this move on the launch of CME futures.

How have raw materials fared?

Both ether and bitcoin are usually considered rare digital goods. So it makes sense to compare them to other previous CME launches.

Diammonium phosphate (DAP), a widely used fertilizer, made its debut in CME futures contracts in June 2004.

Spot prices for diammonium phosphate (DAP). Source: Worldbank.org

Prior to the launch of CME, the Chicago Board of Trade (CBOT) had held these contracts since 1991. Still, there is potential evidence of a price decline before listing. For those analyzing a broader time frame, the listing itself seemed more of a price catalyst than something negative.

South African Coal Futures

Spot prices for South African coal. Source: Worldbank.org

Coal futures were traded on CME in July 2001 and, unlike the examples discussed earlier, did not have a proxy listed on other exchanges. Similar to Bitcoin, there was a 50% increase in the year and a half before its debut.

The result mimics the listing of Bitcoin, as the commodity fell 33% over the next twelve months.

In summary, there is no set trend that allows analysts to predict asset performance following a CME listing. Several historical events were lined up and no specific pattern was found.

Not every futures contract accumulates relevant liquidity, and the delisting of CBOE bitcoin futures contracts proves this point.

At this point, one can safely conclude that the future price development of Ether will depend on a number of factors, such as the performance of Eth2 and its crucial role in the DeFi sector.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.