on the crypto
More and more institutional investors see ether as a store of value, according to Coinbase's review for the year 2020. The cryptocurrency exchange noted that "an increasing number" of its institutional clients have taken positions in ether, the currency. native to the Ethereum network, due to its strong revenue factor.
These customers are the same ones who mostly bought bitcoin in 2020. “The motivation in owning ether that we hear most often from our customers is a combination, firstly, of its evolving potential as a store of value and, secondly, of the its status as a digital commodity needed to power transactions on its network, ”the report wrote.
The Chicago Mercantile Exchange launches futures on ether
While industry leaders, including Coinbase, Bitcoin Revolution and Gemini, continue to have a bullish view of ether, an increasing number of large investors are also exploring the subsector called decentralized finance (DeFi), according to analysts and traders.
Backing the thesis that institutional investors are increasingly interested in ether, the Chicago Mercantile Exchange (CME) announced in December that it will launch Ether futures contracts in February.
An ether-based derivative product on one of the largest regulated futures markets in the world that caters to an institutional audience will give clients the opportunity to hedge their spot positions, reduce their overall risk of investing in ether and provide them with a place to take speculative positions.
The reduction in Grayscale premiums due to ether futures?
CME's new ether futures contracts could also be one of the reasons behind Grayscale Ethereum Trust's premiums decline relative to underlying value. The price gap recently dropped to an all-time low, according to data from on-chain data site Skew.
"The launch of CME futures will allow the institutional crowd to structure the same basic investments that have been so popular with bitcoin," said Denis Vinokourov, head of research at First Bequant Digital Asset Broker. "This competition, coupled with the fact that an ETF (Exchange Traded Fund) based on digital assets appears more plausible, given the growing institutional appetite, could also continue to lower premiums on Grayscale products."
Ethereum 2.0 behind the new institutional investments
While there is plenty of evidence that large ether investors have amassed ether and helped push the cryptocurrency to its new all-time high this week, several analysts and traders largely attribute the rally to the renewed demand from natives for cryptocurrency.
“The ether rally is more organic and more driven by the cryptocurrency industry than the bitcoin rally in recent months,” said Chad Steinglass, head of trading at the CrossTower crypto trading platform.
"There are many specific cryptocurrency traders who are looking at the ether / bitcoin ratio and are shifting allocations from bitcoin to ether as bitcoin has cooled recently." The staking of Ethereum 2.0 is another factor behind the trend of accumulating ether due to the rewards they get in the form of annualized interest on their holdings.
