Cardano (ADA), Solana (SOL), Polkadot (DOT) and several other popular altcoins will have real-time benchmark rates and indices, which could lay the groundwork for more ETFs and derivatives , by the end of the month.
CME Group, which runs the Chicago-based derivatives exchange of the same name, partnered with CF Benchmarks, a cryptocurrency index provider, to roll out the new rates on April 25.
The new benchmark rates will include index pricing for Algorand (ALGO), bitcoin money (BCH), gimbal, Chain link (LINK), Cosmos (ATOM), Litecoin (LTC), Peas, Polygon (MATIC), Solana, Stellar Lumens (XLM) and Uniswap (UNITED).
Benchmark rates and indices themselves are not tradable investment products. As the name suggests, a benchmark rate is price data for an asset. But having this data is an important prerequisite for offering products such as ETFs and futures.
At launch, index price data will be provided by Bitstamp, Coinbase, Gemini, itBit, and Kraken.
“These new benchmarks, which capture 90% of the total market capitalization of investable cryptocurrencies today, are designed to enable traders, institutions and other users to confidently and more accurately manage price risk. cryptocurrencies, price portfolios or to create structured products like ETFs,” Tim said. McCourt, head of equity and FX products at CME, in a press release.
ETFs, or exchange-traded funds, pool assets and sell stocks to investors. It is a way to gain exposure to the underlying assets without owning them directly. Futures contracts speculate on the price of an asset, which can be a stock, a commodity or, in this case, a cryptocurrency.
There is reason to believe that CME will not wait long to increase its crypto product offerings.
Payal Shah, head of equity and cryptocurrency products at CME, said last week that the group is “watchoffering futures contracts for Cardano and Solana.
Currently, CME offers Bitcoin and Ethereum futures, as well as micro Bitcoin and micro Ethereum futures, which can be purchased in denominations of one-tenth the size of BTC or ETH.
And those futures have done remarkably well for CME.
Micro Bitcoin futures, launched last May, have already generated nearly 5 million contracts, Shah said.
“In the few years – just over four years – since we launched our original futures contract, the standard Bitcoin 5x Multiplier Futures contract, we’ve seen it go from 1,000 contracts a day to now 10,000. per day,” she said. . “This growth is breathtaking.”
The enthusiasm for investment products that offer investors exposure to popular altcoins is also shared by traditional and crypto native businesses.
“Evolve’s physical-to-crypto ETFs rely on CME CF benchmark rates to provide liquidity, tight tracking and reliability [net asset value] for investors,” Elliot Johnson, chief investment officer at Evolve ETFs, said in a press release. “We are very pleased to see the CME CF family of indices growing to lay the groundwork for new, innovative ETFs in this highly coveted asset class.”
The company offers ETFs that give investors exposure to cybersecurity, automotive innovation, and more recently Bitcoin and Ethereum. Once benchmark rates are available, Evolve could potentially create ETFs to give investors exposure to altcoins.
At Genesis Global Trading, an over-the-counter crypto trading desk, having more benchmark rates will also create more lines of business.
“We are excited to be a liquidity partner on the variety of instruments that will be built on it,” Joshua Lim, head of derivatives at Genesis Trading, said in the release.
A liquidity partner acts as a market maker for assets, in this case cryptocurrencies, buying and selling them at specified prices as orders are placed. Unlike a centralized exchange, OTC desks operate within a network of brokers.
They make a profit when there is a difference between the price offered to a buyer and the actual price of the asset. Having benchmark rate data allows companies like Genesis Trading to act as a market marker for more assets, either cryptocurrencies themselves or futures contracts.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.
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