Ether Futures Enter Discount Territory on CME: A Bearish Indicator?

• Ether futures on the Chicago Mercantile Exchange (CME) signal a bearish sentiment.
• K33 Research highlights unusual trends ahead of anticipated ether ETFs.
• Bitcoin faces its own set of challenges and opportunities with expected ETF approvals.

Analysts at K33 Research examine the peculiar discount of ether futures on CME and its implications, while bitcoin braces for increased volatility.

Ether Futures’ Unprecedented Decline

The ether futures market, on a usually bullish CME, is currently in an unforeseen bearish phase, much to the surprise of market analysts. K33 Research suggests this unexpected movement is ahead of the anticipated ether futures ETFs. Notably, ether futures have been trading at a much lower premium than bitcoin futures in the past few weeks, widening their difference over the last week. Senior Analyst Vetle Lunde and Vice President Anders Helseth from K33 have underscored this in their fresh report, stating that ether futures are now at a discount when juxtaposed with the spot market.

Factors Accentuating the Bearish Sentiment

The bearish indicators are not solely based on the difference between ether and bitcoin futures. Other market mechanisms have reinforced this sentiment. Perpetual contracts’ below-average funding rates, the recent 5% surge in open interest, and the willingness of options traders to pay premiums for puts with sooner expiries underscore this bearish mood. Notably, the analysts had earlier vouched for a higher exposure to ether than bitcoin in September and October, primarily due to the SEC’s inclination towards approving futures-based ether ETF proposals. In a significant move, Ark Invest alongside 21Shares lodged a joint application for a spot ether ETF just the previous week.

Anomalies in the Ether Market

Given the high anticipation of ether futures ETFs by October, Lunde and Helseth find the discounting of ether futures a bit offbeat. They said, “There are no signs hinting at the rejection of ether ETFs, and the variance between ether and bitcoin futures isn’t historically alarming. However, we will continue to keep a close watch on these developments.”

Bitcoin’s Upcoming Challenges and Prospects

While ether faces its set of puzzles, bitcoin is not devoid of its own set of challenges. News flow about the spot bitcoin ETF approval saw a slowdown after the SEC put off seven spot bitcoin ETF propositions till mid-October. Nevertheless, with the potential approval of a spot bitcoin ETF lurking, the analysts remain hopeful for the future. The duo added a note of caution, mentioning the signs of increased volatility in recent bitcoin price actions and the looming market fear of a short-term sell-off. This sentiment is further fueled by the recent bankruptcy estate of FTX.

U.S. CPI Inflation and Its Impact on Crypto

The U.S. CPI inflation figures for August were in accordance with market expectations. However, these figures seem to have had minimal influence on the crypto market, with major cryptocurrencies like bitcoin and ether remaining largely unaffected throughout the day.

Conclusion

While the crypto market is known for its volatility, the current anomalies, especially in the ether futures market on CME, have baffled analysts. The forthcoming period in the crypto space promises to be intriguing, with multiple developments on the horizon. Investors and traders are advised to stay informed, conduct due diligence, and tread cautiously.