Futures contracts enable institutional investors to hedge against future price movements of an asset with the possibility of shorting them. Just like with Bitcoin (BTC), the Chicago Mercantile Exchange (CME) launched its futures trading when Ethereum was trading on its way to an all-time high.
It is not surprising then that the first month of trading futures has been bearish as the Ethereum price has dropped heavily and those shorting it on CME would have been correct to do so.
Déjà vu For Crypto Futures
CME launched its Ether futures on Feb. 8, and at the time the asset was trading at around $1,600. As reported by CryptoPotato at the time, a bearish momentum was expected.
Ethereum prices hit an all-time high of $2,050 on Feb. 21, but have fallen by 30% since then to today’s prices of around $1,53 – 10% lower than when the futures were launched.
ETH has underperformed BTC since the CME futures launch but a similar situation happened with BTC, which underperformed ETH after its CME futures launch.
When Bitcoin futures were first launched in December 2017, the asset hit an all-time high a week or so later then pulled back heavily leading to a similar effect on futures markets. Exactly the same has happened with Ethereum a little over three years later.
Of course, Bitcoin has recovered and entered a new bull market and the same will happen with Ethereum regardless of how far this correction goes.
In terms of volumes, the CME is reporting its highest ever day as Feb. 23 with 2,092 contracts traded. That volume has slumped to around 749 contracts on Feb. 26.
Longer-term contracts are likely to be bullish as the rollout of ETH 2.0 and the growth of staking opportunities may push ETH prices to new highs whilst alleviating those epic transaction cost issues.
Ethereum Price Outlook
Currently, Ethereum has gained 4% on the day but has dropped almost 30% since its peak last weekend. The asset fell to a monthly low of $1,300 on Feb. 28 but has since recovered a little to trade back over $1,53 again at the time of writing.
There is strong support at current levels so ETH needs to remain above it to maintain the current action. A fall below could see ETH settle at just over $1,200 but a sustained move higher would need to see resistance level at $1,600 broken again.