In my previous article “CBOE Completes Upgrade, Other Crypto Futures Coming?“, I speculated that now that the CBOE had finished it’s latency reduction upgrades it would begin to introduce more currencies. This prediction seems to have at least partially shown some validity with statements coming out of the CBOE Risk Management Conference on Friday which featured a fireside chat with Gemini founders Tyler and Cameron Winklevoss. In the fireside chat, Cameron and Tyler said that the CBOE is interested in expanding to more cryptocurrencies. The only reason they haven’t yet is actually Gemini’s lack of support for coins other than Bitcoin and Ethereum.
This is significant because it means that CBOE fully intends to issue futures on other cryptocurrencies. The hold-up, it would appear, is Gemini itself. At the moment Gemini only offers Bitcoin and Ethereum. This is a problem since CBOE has an exclusive deal with Gemini that it will only use Gemini to calculate it’s futures. Therefore, in order for the CBOE to add more coins, Gemini also needs to add more coins. This also means that Ethereum, which is already offered on Gemini, is likely to come to the CBOE future markets very soon.
What is the CBOE?
The CBOE (Chicago Board Options Exchange) is a futures market that was among the first to get the go-ahead to offer futures on Bitcoin. Like any other futures, these need a data source to track. In this case, that data source was the prices on the Gemini Exchange founded by the billionaire famous (or infamous, if you’re a fan of The Social Network) Winklevoss Twins.
The partnership has received criticism in the past for several reasons. Aside from the lack of diversity in the coins offered on the exchange, the most prominent concern is the trading volume. The futures markets are entirely based on the performance of Bitcoin on the Winklevosses trading platform and low trading volume makes the platform easy to manipulate for relatively little cash. For reference, as this article is being written CoinMarketCap has Bitcoin at $9,346.50 while Gemini has Bitcoin at $9,224.71. These price differences are not insignificant: especially on trades involving millions of dollars. Market manipulations exploiting the low trading volume of Gemini have been an ongoing concern and the addition of more coins has the potential to exacerbate the problem by diluting the trading volume of individual coins.
What comes next?
In line with my last article, it’s reasonable to assume Ethereum will be the next cryptocurrency to have a CBOE derivative. It’s #2 on CoinMarketCap and the only other cryptocurrency that is trading on Gemini at the moment. I’d be surprised if nothing was announced in the next month.
At the same time, we can expect to see more coins being added to Gemini. Considering the Winklevosses comments on pressure from the CBOE to add more coins, we can only assume that new coins added on Gemini will be next in line for the CBOE.
How will this affect the crypto markets?
If the past is any indication, the introduction of new futures will cause a price boom. When the addition of Bitcoin was announced on the CBOE markets the price soared 13%. It wouldn’t surprise me at all if we saw Ethereums price boost on news of it’s addition to the CBOE markets.
Additionally, I anticipate huge price boosts for any lower market cap currencies added to Gemini. As it’s logical that most traders will reach the same conclusion we did and predict that any coin added to Gemini is something the CBOE pushed for, given the two companies special relationship. The futures markets have seemed to do two things so far. First of all, they seem to have stabilized the price of Bitcoin (although whether or not this constitutes causation or correlation is very much up for debate). They have also legitimized the currencies in the eyes of many Wall Street traders now engaged in the Bitcoin futures markets.
Featured image from Shutterstock.
Last modified: March 4, 2021 5:05 PM