May 27, 2024
ETH


Asset management firm Valkyrie has taken a significant step by filing for an Ether or Ethereum (ETH) futures exchange-traded fund (ETF) called “Valkyrie Ethereum Strategy ETF” with the United States Securities and Exchange Commission (SEC). 

Valkyrie Ether Futures ETF Include Secure Collateral Investments

According to the filed documents on August 16, the proposed ETF will not directly invest in Ether, the native token of the Ethereum blockchain. Instead, it aims to acquire a portfolio of Ether futures contracts. 

These contracts are traded on commodity exchanges registered with the Commodity Futures Trading Commission (CFTC), primarily focusing on contracts traded on the Chicago Mercantile Exchange (CME). 

The value of these futures contracts will be determined by the CME CF Ether Reference Rate, which tracks the price of Ether across selected cash exchanges.

Per the filing, the Fund intends to employ a “rolling” strategy to manage the expiration of futures contracts. As contracts approach their expiration date, they will be replaced by similar contracts with later expiration dates. 

These contracts allow investors to speculate on Ether’s future price movements without owning the digital asset directly. 

Apart from Ether futures contracts, the Fund will invest its remaining assets in cash, cash-like instruments, or high-quality securities, collectively called “Collateral Investments.” 

These may include U.S. Government securities, money market funds, and corporate debt securities rated investment grade or comparable quality. Collateral Investments serve the purpose of providing liquidity and satisfying margin requirements for the Fund’s futures portfolio. 

In addition, the Fund may engage in reverse repurchase agreements to help maintain the desired level of exposure to Ether futures contracts.

These factors are expected to position the proposed Ether ETF favorably with the SEC, as it aligns with their requirements. Therefore, there is optimism for a promising decision in support of the Ether ETF application.

Options Market Supports BTC And ETH Amid Strong US Economy

The strength of the US economy has propelled the US Dollar Index (DXY) to deliver a sharp performance, exerting continued pressure on the cryptocurrency market. However, despite liquidity challenges, the gradual decline in Bitcoin (BTC) and ETH prices has not exceeded expectations. 

Fortunately, the options market continues providing substantial price support for BTC and ETH, ensuring stability without external liquidity.

Digital asset management platform Blofin has closely analyzed the options market and identified significant factors contributing to the ongoing support for BTC and ETH. 

Positive gamma has impacted BTC, “sticking” its price around the $29,000 mark. Similarly, for ETH, market makers’ hedging behavior around the $1,800 strike price has also provided support, preventing a steeper decline in its price.

Despite the overall support from the options market, Blofin’s analysis reveals a discrepancy in the sentiment of block traders towards BTC and ETH. 

Block traders, who typically execute large-volume trades, believe more strongly in BTC’s resilience than ETH. This preference may stem from BTC’s established position as the leading cryptocurrency and its reputation as a reliable store of value.

Overall, Blofin’s analysis underscores the crucial role the options market plays in supporting BTC and ETH amid liquidity pressures. The positive gamma effect and market makers’ hedging actions have contributed to maintaining the stability of both cryptocurrencies.

ETH
ETH’s downtrend on the 1-day chart. Source: ETHUSDT on TradingView.com

As of the time of writing, the second-largest cryptocurrency in terms of trading volume is trading at $1,825. Following in the footsteps of Bitcoin, Ethereum has experienced a 0.8% decline over the past 24 hours, further extending its downward trend over the past 30 days, resulting in a 4% decline during that period.

Featured image from iStock, chart from TradingView.com





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