CME Group, the renowned derivatives exchange, has unveiled its plans to introduce Ether/Bitcoin (ETH/BTC) ratio futures, further expanding its cryptocurrency offerings. The launch of these innovative futures contracts is set for July 31, subject to regulatory approval.
Building upon its success in the cryptocurrency market, CME Group has steadily broadened its digital asset portfolio over the years. In December 2017, the exchange introduced the first Bitcoin futures contract, allowing institutional investors to participate in Bitcoin trading actively. This was followed by the introduction of Ethereum futures contracts in February 2021, enabling investors to gain exposure to the second-largest cryptocurrency by market capitalization.
Capturing relative value trading opportunities
The Ether/Bitcoin Ratio futures have been designed to cater to the evolving dynamics of the cryptocurrency market. According to Giovanni Vicioso, the Global Head of Cryptocurrency Products at CME Group, Ether, and Bitcoin have displayed a high degree of correlation. He added that as these assets have grown and matured, market dynamics may impact one more significantly than the other, creating relative value trading opportunities. Vicioso declared that by introducing the Ether/Bitcoin Ratio futures, CME Group aims to enable investors to capture exposure to both cryptocurrencies in a single trade, irrespective of their directional view. This innovative contract is expected to provide many clients with opportunities to hedge positions and execute various trading strategies in an efficient and cost-effectively.
Furthermore, Vicioso highlighted the significance of the Ether/Bitcoin Ratio futures in the evolving market. He emphasized:
“With the addition of Ether/Bitcoin Ratio futures, investors will be able to capture ether and bitcoin exposure in a single trade, without needing to take a directional view. This new contract will help create opportunities for a broad array of clients looking to hedge positions or execute other trading strategies, all efficiently and cost-effectively.”
The Ether/Bitcoin Ratio futures will be cash-settled, meaning that cash will be exchanged at settlement instead of the underlying instrument. The final settlement price of CME Group’s Ether futures will be divided by the final settlement price of CME Group’s Bitcoin futures to determine the value of the ratio. This new futures contract will adhere to the identical listing cycle observed in CME Group’s existing Bitcoin futures and Ether futures contracts to ensure consistency and convenience.
A promising tool for investors
The introduction of Ether/Bitcoin Ratio futures marks another significant step toward providing investors with enhanced flexibility in managing short-term price risks associated with these cryptocurrencies. By offering daily expirations for Bitcoin and Ethereum futures options contracts, CME Group aims to address the needs of market participants amid the heightened volatility of the digital asset sector.
It is important to know that the Ether/Bitcoin Ratio futures contract is a financial derivative that allows investors to speculate on or hedge against the relative performance of Ethereum and Bitcoin. Traders can take positions based on their expectations of how the ratio will change over time, regardless of the relationship between the two assets. This instrument opens doors for a broad range of trading strategies and can be applied to various underlying assets, such as stocks, commodities, or indices.
Pending regulatory approval, the Ether/Bitcoin Ratio futures will provide investors with a valuable tool to capture exposure to the two largest cryptocurrencies in a single trade. The ratio will always be positive across all contract months, ensuring consistency in trading operations.
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