Ethereum Inches closer to the Official US Trading SystemMarch 13, 2018
Ethereum is an interesting cryptocurrency thanks to several reasons. Firstly, it is the second one in terms of market cap, with only BTC in front of it. Over 2017, it reached the highest price per token when it climbed to almost $1,500 and at that moment, many people suggested the possibility of so-called flippening.
This event would include ETH taking over bitcoin as the world’s dominant cryptocurrency. This idea was gaining ground just as ETH was gaining capital in its network. In fact, fiat currency was literally pouring into ETH with the starting months of 2017, leading to the market cap charts of BTC and ETH slowly starting to move near each other.
However, with the beginning of February 2018, the great fall in the crypto markets was already in full swing and with it, any chance of the flippening was gone out of the window. The price of ETH dropped more or less in half and the market cap of the digital currency features nothing near the growth of 2017.
But recently, a small piece of news opened a possibility of ethereum once again shooting for the star. Here are the details of this news and the reasons why it could provide the cryptocurrency to a jumping board which currency only bitcoin experienced.
ConsenSys is a New York-based startup working in the domain of blockchain application. The company recently revealed it is creating a partnership with True Digital, an affiliate of trueEx.
The same company is known for working in the interest rate swap online marketplace. The aim of the same business deal is to make a benchmark price of ether or ETH. This means that the two companies will attempt to devise a system of having a unified and readable price of the token created by the ethereum cryptocurrency network.
The plan includes creating a target reference index which would be easily used by anyone interested in the price of ETH at any given point. The same is a big step towards the process that would lead to this cryptocurrency becoming available as a tradable asset for institutional investors.
This came along with the information that trueEx is planning to start a derivatives marketplace that will be employed for crypto assets. Their first contract, most likely made with BTC is waiting for the say from the CFTC in the US. Clearly, the gears are in motion for the ConsenSys and their partners, all of which seem poised to set off on this process. The end moment would be to attain some financial product or more of them, all of which are based on the ETH price.
A Repeat of Crypto History
It is most likely that these companies will get their initiative through. This would be the first step in getting a selection of financial products based on the same cryptocurrency. With this, it could be said that ETH is chasing after the chance to become once more a part of the same exclusive ecosystem as bitcoin.
A similar thing occurred for the bitcoin network in 2017 when the CFTC provides authorization to CBOE and CME Group to begin trading of their BTC futures product. This led to the boom in the BTC price and overnight allowed it to explode upwards. It, along with the process of Japan recognizing the same cryptocurrency, is one of the biggest factors of the amazing expansion of 2017.
Now, many are asking themselves if ETH can do the same with its network. TrueDigital is certain that it is possible, not on the terms of price rise but the sheer interest in having ETH-based financial products. According to them, there is a huge institutional interest in the products like this, but only if they are served inside of a regulated and liquid marketplace.
If they had that, TrueDigital is certain that many institutional players would jump at the opportunity to invest. But as of now, the same space is lacking the proper foundation, platforms, and infrastructure that is otherwise present in many other markets.
In fact, the institutional factions will not even consider a market that is on the same footing as the crypto space. Because of that, the need for a price of ETH would provide the opening for the start of institutional trading.
Hedges and Diversification
An ETH futures market, for example, would be something many companies in the financial sector can use to great extent. Firstly, this would just like the BTC futures, provide many with an excellent means of building a hedge and maintaining it against the oscillation in traditional markets.
The cryptocurrency system as is has been used by many Chinese entrepreneurs and investors for saving their capital during the devaluation of yuan. This process took place during the previous years and those who could move funds into crypto did not suffer huge losses. Futures products only allow the same to happen when it comes to companies.
This logic applies to the diversification of portfolios. It is certain that not many companies want to purchase heavily into the crypto market but having access is still very useful. BTC, just like any other digital currency in the top 10 list, is used for anything ranging from online betting to online purchases. Having an option to buy into these is a great means of making a holdings portfolio a lot more spread out across different financial domains.
Peace of Mind
Finally, there is one more thing that differentiates ETH from its main competitor. For many institutional investors, the idea that the creator of BTC is still unknown might be a deep-rooted deal breaker. On the other hand, ETH does not have that problem.
This difference could be the key element that helps propel the network a lot further than it is now. This would reflect on the price of its token but also the concept of the flippening might return.
Here, like in eSports, it is difficult to say if this strategy will work for ETH products for institutional investors. But, the desire to take ETH to the next step is clearly present in the development community.