Get the inside scoop on ethereum futures and learn how the number two cryptocurrency is set to make a big impact.
Ethereum Futures Launch Next Week as No. 2 Cryptocurrency Goes Increasingly Mainstream
February 3, 2021
Ethereum hit record highs yesterday as crypto investors prepare for futures contracts and several other new products.
ETHUSD, the second biggest cryptocurrency by market cap, touched $1,500 for the first time at 11:52 a.m. ET on Tuesday. Unlike larger peer Bitcoin (BTCUSD), which broke its 2017 records last March, ETHUSD has challenged its old peaks without closing above them. That is, until yesterday.
The price surge comes with CME’s futures set to begin trading Sunday evening. They will be the exchange’s second crypto-based futures product, following the launch of Bitcoin contracts three years ago.
Two other products this month will also give investors access to Ethereum. Grayscale announced on Monday it would reopen its Ethereum Trust (ETHE) to accredited investors. Galaxy Digital also plans to launch an Ethereum-based fund for institutional investors in mid-February.
Why Is Ethereum Going Up?
Ethereum has gone up as decentralized finance (DeFi) gains acceptance. DeFi uses Ethereum as an operating system for loans using so-called smart contracts. Smart contracts are fully automated financial programs running on Ethereum. (It’s one way investors can earn interest on crypto holdings.)
Over $28 billion of value was locked up in the DeFi market yesterday, an increase of 82 percent since the end of 2020.
Backers think it’s just the tip of the iceberg. Mike Novogratz, CEO of Galaxy Digital, predicted in a November 10 YouTube interview that credit-card issues will start using Ethereum in coming months. Mainstream lenders and central banks could follow.
“I think you’ll see more projects migrate” to Ethereum, Novogratz said. “That’s what’s going to drive the attention.”
Ethereum is also in the process of a major upgrade that will change its mining system from “proof of work” (PoW) to “proof of stake” (PoW). In other words, validators running the platform get paid based on how many coins they own. That structure is considered faster than PoW, which is used by Bitcoin.
Ethereum 2.0 will also use the computing technique “sharding” that breaks up work into smaller parallel pieces, helping to increase its speed over 5,000-fold. The result is expected to be a fast, reliable, anonymous transaction system. Participants will pay in fractions of Ether known as “wei” (one-billionth of a coin).
Ethereum and Fee Burning
Another change that could be implemented soon is so-called “fee burning.” Introduced under EIP-1559, the project would calculate a base level for fees and make Ethereum the sole cryptocurrency for payments. Proponents say that would encourage more use (because transaction fees would be more predictable), while also reducing new supply. Both forces could be potentially positive for Etherum.
In conclusion, the world of cryptocurrencies continues to advance as more investors gain access to digital assets. Bitcoin was in the spotlight when it broke out last year, and now attention may be shifting to Ethereum.