Ethereum (Ether), the second largest cryptocurrency by market cap after Bitcoin, has hit a new all-time high of above $1, 800 as it continues its meteoric rise.
At the same time, the cryptocurrency has also crossed the $200 billion market cap, a figure that the entire cryptocurrency space crossed for the first time just 3 years ago.
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SEE ALSO: Bitcoin Breaks Above $40K … Again
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A number of reasons have been provided that could be driving this massive growth in the value of Ether:
- The re-opening of the Grayscale Ethereum Trust to investors
- The launch of the ETH CME Futures
- The DeFi boom largely dominated by the Ethereum ecosystem
- Ethereum balance on exchanges is at a 16-month low
- Overall market sentiment
The launch of the Ethereum Chicago Mercantile Exchange (CME) futures was off to a good start with more than $30 million in futures contracts traded in just 24 hours after launch.
This follows the addition of the Bitcoin Futures in December 2017, the same week that saw bitcoin hit an all-time high.
While exchanges like Binance, OKEx and others have been offering ETH futures trading since 2017, CME has opened new exposure path to institutional and risk-averse corporations and investors.
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What is a Futures Contract?
Futures contracts represent obligations to buy or sell an asset at a given price on a predetermined future date, and can be bought and sold like stock and other market-traded assets. That allows individuals or companies to bet that the market price will be higher or lower than the contract price at execution, allowing them to profit from the difference.
Futures contracts are also commonly used as hedging instruments. This means that if a business knows they need to buy a specific amount of Ethereum at a given upcoming date, futures contracts are a good way to lock in a known price in advance.
The CME Ethereum and Bitcoin futures are cash-settled instruments. meaning the difference between spot prices and executed contract prices are paid in cash, rather than any actual crypto changing hands.
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RECOMMENDED READING: Decentralized Exchanges Volume Explodes to Over $43 Billion as DeFi Boom Breaks the $27 Billion Milestone By January 2021
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