Ethereum price cools on CME ETH futures launch but remains primed
The latest dip comes straight after Ether futures contracts went live on CME today, but it may be short lived.
- Over the course of 2020, a whopping $926 million worth of investments have made their way into the Ether ecosystem
- Experts suggest that a push above the $2,500 range may be on the cards for ETH by mid-March
- Ether gas prices once again rose to relative highs last week, exposing the platform’s ongoing scalability struggles
After surging to a new all-time high of $1,750 on Feb 5, Ether’s momentum seems to have cooled off a bit, currently trading around $1,600. Despite this slight downward action, the premium altcoin is still exhibiting weekly gains of 20% as well as an average 30-day profit of 29%.
In this regard, the above-stated price action seems to have come in the wake of Ethereum’s gas fees once again surging to relative highs, continuing to expose the platform’s growing scaling-related issues as well as the lack of a clear layer 2 option. As a result, a number of retail investors were unable to facilitate their personal transactions across various DeFi protocols, albeit briefly.
Providing his views on the recent dip from $1,750 to $1,590, Sergej Kunz, CEO and co-founder of the DeFi aggregator platform 1inch, told Finder that his team had been anticipating a “healthy correction” for some days now, especially with the premier altcoin setting new all-time high’s seemingly every other week. Also, when asked about Ether’s near term outlook, he opined:
“From my point of view, one of the drivers for ETH is the fact that the crypto market is currently lacking ‘available ETH’ especially as some big players have continued to enter the market and started buying huge amounts of ETH, as much as 4,000-5,000 ETH at a time”.
Other factors that Kunz believes are helping spur the pro-ETH narrative include an increasing number of hodlers staking their Ether in Ethereum 2.0 contracts, thereby creating a deficit in the market. Additionally, recent stories related to the Robinhood-Gamestop saga circulating across the internet as well as Elon Musk continually showcasing his support of various cryptos have also had their part to play in the matter. “All of these developments have influenced the current state of the crypto market”, he added.
Will Ether be able to breach the $2,000 barrier anytime soon?
According to a study released by crypto investment fund Grayscale on Feb 7, if a proposed Ethereum network upgrade - labeled EIP 1559 - was to be implemented after community consensus, it would enable the platform to automatically deploy the use of transaction fees for ETH buying purposes from the open market - only for the acquired tokens to be destroyed subsequently.
This would not only help in reducing ETH’s overall supply (by 1-4% annually) but also potentially create a positive feedback loop in relation to the digital currency’s value. In traditional finance terms, the process would be somewhat analogous to a company that earns a profit on certain assets only to buy back the same shares at a later date.
Elucidating his views on the subject, Tim Ogilvie, CEO of Staked, an Ethereum infrastructure services company, told a prominent crypto media outlet that this potential burning of billions of dollars worth of ETH could help pump the price of the digital asset quite substantially, adding: “If you like BTC’s hard cap at 21 million tokens, you’ll love ETHs declining supply."
Similarly, on the subject, Michael Geiger, CEO of Libertex, a platform that allows users to trade forex, cryptocurrencies, commodities, and stocks, told Finder that as things stand, Ethereum is about half-way through its bull cycle and 50% off from its local high, adding:
“I expect the asset to appreciate to around 2700 dollars by March, and lose momentum over the summer towards 1000 dollars before gearing up for a new multi-year bull market reaching towards the $10,000 per ETH range. DeFi is the main factor behind the current rally and yes ETH will likely pull the rest of the market up with itself when it does soar.”
Ether futures go live on CME
Futures options for Ether have gone live on the world's largest financial derivatives exchange, CME, as an increasing number of investors across the globe have been looking to take advantage of the mounting institutional interest in relation to this burgeoning digital asset.
As a result of the CME listing, investors - from the crypto as well as the traditional financial space - will be able to diversify their holdings outside of Bitcoin futures with all of the contracts being entirely cash-settled. Also, prices will be determined using a CME reference rate that will draw from real-time data obtained via a number of prominent cryptocurrency exchanges including Bitstamp, Coinbase, Gemini, itBit, and Kraken.
In light of this news, analysts over at JP Morgan have claimed that the listing could very well be followed by a fall in Ether’s value, similar to what was witnessed back in late 2017 when Bitcoin futures made their way into the market. Lastly, it bears mentioning that over the course of 2020, a reported total of $926 million has made its way into the Ether market.
Disclosure: The author owns a range of cryptocurrencies at the time of writing