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- 1 Many traditional finance players keep stepping into Bitcoin ETF following the filing with the US SEC.
- 2 CME is also preparing to benefit from the financial product offering of similar categories.
The Bitcoin exchange-traded-fund (ETF) frenzy is about to see another participant. The Chicago Mercantile Exchange (CME) Group announced the plan for launching Ethereum/Bitcoin (ETH/BTC) ratio futures. Following the approval, the ratio futures product of leading cryptocurrencies will be available for offering from July 31, 2023.
According to the official website with details of the product, it will be designed to offer Ethereum futures price divided by the Bitcoin futures price. The ticker for ETH/BTC futures ratio product is EBR.
The final Ethereum (ETH) price will be divided by Bitcoin (BTC) to bring the ratio. It will remain positive throughout the contract months.
The specific type of financial derivative, the ratio futures contract, enables the investors to venture onto the relative performance of two underlying assets or hedge against it. As per the contract, the ratio between both assets is determined in advance. It allows traders to take positions on the basis of their hunch on changing ratios in the future. Stocks, commodities, indices or the like could be treated as assets for ratio despite their correlation.
Global Head of cryptocurrency products at CME Group, Giovanni Vicioso stated that there has been a strong correlation between the leading cryptocurrencies: Bitcoin (BTC) and Ethereum (ETH). With time, both assets have grown differently and their performance became prone to market dynamics where one asset’s performance can affect the others. It ends up creating creative opportunities for relative value trading.
For the recent offering from CME of ETH/BTC ration futures, Vicioso asserted that the product will allow investors to apprehend the two biggest cryptocurrencies within a “single trade.” Additionally, the trade would not even have the need to consider any directional view.
According to the crypto products head, “This new contract will help create opportunities for a broad array of clients looking to hedge positions or execute other trading strategies, all in an efficient, cost-effective manner.”
The Chicago-based global derivatives marketplace, CME, stepped into the Bitcoin futures contract in 2017. During the time, the broader crypto market was witnessing a strong bull run which made the BTC price take a significant jump from $1,000 to $20,000 within the span of a year.
With CME’s foray into the space, institutional investors got the opportunity to have exposure to the crypto market within a regulated environment in the form of Bitcoin futures. The action boosted mainstream adoption and liquidity in the crypto market.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
