The Chicago Mercantile Exchange (CME) Group on Thursday revealed plans for the launch of Ethereum/Bitcoin (ETH/BTC) ratio futures on July 31, pending regulatory approval.
Per the product description on the company's website, the ticker for the ETH/BTC ratio futures is EBR, with the ratio defined as Ethereum futures price divided by the Bitcoin futures price. The ratio will be calculated as the final settlement price of ETH divided by BTC and will always be positive across all contract months.
"Historically, Ether and Bitcoin have been highly correlated; however, as the two assets have grown over time, market dynamics may affect the performance of one more than the other, creating relative value trading opportunities," CME Group Global Head of Cryptocurrency Products Giovanni Vicioso said in a statement.
Efficiently capture the relative value of ether and bitcoin in a single trade with Ether/Bitcoin Ratio futures, launching July 31. https://t.co/WDFhIt5rJ7
— CME Group (@CMEGroup) June 29, 2023
A ratio futures contract is a type of financial derivative that allows investors to speculate on or hedge against the relative performance of two underlying assets. The contract sets a predetermined ratio between the two assets and allows traders to take positions based on their expectations of how the ratio will change in the future. The two assets can be related or unrelated, such as stocks, commodities, or indices.
According to Vicioso, the ETH/BTC ratio futures will enable investors to capture the crypto industry’s two largest assets “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 in an efficient, cost-effective manner," added Vicioso.
CME’s foray into crypto
CME introduced its first Bitcoin futures contract in December 2017 amid the strong bull run that took the price of the leading cryptocurrency from $1,000 at the start of the year to above 20,000 before Christmas. The move was significant for the cryptocurrency market as it provided institutional investors with a regulated platform to trade Bitcoin futures, allowing for greater mainstream adoption and potentially increased liquidity in the market.
The launch of Bitcoin futures on CME was, however, attributed to the consequent market slump though, although Tim McCourt, Global Head of Equity and FX Products at CME Group, dismissed such speculations.
The launch of Ethereum futures trading on CME followed in February 2021, which made it easier for institutional investors to gain exposure to the world’s second-largest cryptocurrency by market cap.
The exchange saw over 151,000 Bitcoin, or $4.67 billion in current prices, allocated in Bitcoin futures contracts in the last 24 hours, according to data from CoinGlass.
Ethereum futures at CME saw 226,000 ETH, or $429.2 million, over the span.
Over the past several years, the CME Group also expanded its digital asset offerings to both Bitcoin and Ethereum options, as well as for micro BTC and micro ETH futures contracts.