Ever since the Commodity Futures Trading Commission (CFTC) — the U.S. regulatory agency responsible for dealing with commodities and their derivatives — approved the CME and CBOE to launch Bitcoin futures in late-2017, cryptocurrency investors have been asking for similar products for Ethereum, XRP, and the like.
While progress has been made towards the maturity of the cryptocurrency markets, it apparently might be a while before the U.S. gets its own U.S.-regulated Ethereum future or derivative.
Ethereum Futures On Their Way?
Earlier this year, it seemed that Ethereum investors were about to get their wish for an Ethereum future. This hope started bubbling in May, when CoinDesk reported that a senior official of the CFTC said that “we can get comfortable with an Ether derivative being under our jurisdiction,” confirming that ETH lies in the jurisdiction of the CFTC, not the SEC.
This hype was renewed in early October, when the new CFTC chairman, Heath Tarbert, remarked at the Yahoo! Finance All Market Summit that he believes Ethereum isn’t a security. “We’ve been very clear on bitcoin: bitcoin is a commodity. We haven’t said anything about ether – until now… It is my view as chairman of the CFTC that ether is a commodity,” he said, according to this report.
Then, Heath added in a chat at DC Fintech Week a few weeks later that he believes that Ethereum futures are likely to come to market within the next six to 12 months.
But according to CoinDesk’s Director of Research, Noelle Acheson, this is unlikely to happen. She wrote in an extensive article about all things Ethereum that it is highly unlikely that “we will see ether futures in significant volume on a regulated U.S. exchange any time soon. If ever.”
Backing her scathing remark, Acheson looked to a confluence of factors. These include but aren’t limited the relative illiquidity of Ethereum compared to Bitcoin, the uncertainty regarding the blockchain’s consensus mechanisms and potential contentious hard forks, the DAO hack, the proposed potentially security-like ability to stake ETH with a future update, and the simple fact that Ethereum wasn’t built to be an investment asset.
A Blessing in Disguise
What’s funny is that futures may actually be bad for the price of cryptocurrencies, meaning that a delay put on the release of regulated Ethereum derivatives may be a blessing in disguise.
According to a CoinDesk interview with Christopher Giancarlo, who recently left the U.S. Commodity Futures Trading Commission (CFTC) after a five-year tenure as a chairman, the launch of Bitcoin futures was an attempt to pop the bubble-like prices that existed at the end of 2017:
“One of the untold stories of the past few years is that the CFTC, the Treasury, the SEC and the [National Economic Council] director at the time, Gary Cohn, believed that the launch of bitcoin futures would have the impact of popping the bitcoin bubble. And it worked.”
While the assertion that Bitcoin futures brought BTC falling from $20,000 to $3,000 may seem like a stretch, Giancarlo drew attention to research from the San Francisco Federal Reserve, in which the branch of the central bank credited regulated futures as the pin that popped the Bitcoin bubble.
The reason: Bitcoin is inherently a market for believers and there isn’t a way to short or hedge the market, you have constantly increased prices and likely inflated price discovery.
All things considered, would it be too irrational to assume that Ethereum futures would result in decreasing prices for the cryptocurrency market?