#ETFs The announcement reflects the growing institutional demand for Ripple Labs' cryptocurrency.
The Chicago Mercantile Exchange (CME) confirmed that XRP futures will hit the market on May 19.
After regulatory approval, traders will be able to trade contracts in large size (50,000 XRP) or micro (2,500 XRP).
As CriptoNoticias has already explained, futures contracts allow investors to speculate on the future price of an asset on a specified date without needing to directly own the cryptocurrency, in this case, XRP.
It is an agreement between two parties: one commits to buying and the other to selling the asset at a predetermined price in the future. When the contract's expiration date arrives, the parties exchange the cash difference (in cash-settled contracts), depending on whether the asset's value was greater or lesser than initially agreed upon.
This type of instrument is used both to speculate on market movements (betting that the price will go up or down) and to hedge against risks in high volatility scenarios.
In the case of XRP, futures allow traders and institutions to have exposure to the asset without needing to hold it directly.
CME Group's XRP futures will be cash-settled and based on the CME CF XRP dollar reference rate, which tracks the asset's price daily until 16:00, London time.
After the launch date was announced, Brad Garlinghouse, CEO of Ripple Labs, stated on his social media: 'Although it comes late in several ways, this is an incredibly important and exciting step in the continued growth of the XRP market.'
In this way, XRP is incorporated into the portfolio of digital asset-linked instruments offered by CME Group, which already has derivatives such as contracts on Bitcoin (BTC), Ether (ETH), the native currency of Ethereum.
In addition, futures contracts for Solana (SOL) were recently launched.
The concrete fact is that these launches highlight the growing institutional interest in XRP since the U.S. Securities and Exchange Commission (SEC) dismissed the lawsuit against Ripple.
As reported by CriptoNoticias, in December 2020, the regulatory agency, then led by Gary Gensler, filed a lawsuit alleging that XRP was an unregistered security and, therefore, its sale was prohibited.
With the legal conflict now resolved, the path is clear for more financial products based on XRP to continue entering the market.
In addition to futures, it is worth noting that at the beginning of the month, leveraged futures exchange-traded funds (ETFs) were launched. This instrument is managed by Teucrium Investment Advisors and is named the Teucrium 2x Long Daily XRP ETF (XXRP).
This ETF aims to double the daily performance of XRP using 2x leverage.
In simple terms, if the price of the cryptocurrency rises by 5% in a day, the fund will attempt to advance by 10%. Conversely, if XRP falls by 5%, the value of the ETF would drop by approximately 10%.
However, most of the XRP community eagerly awaits the approval of spot ETFs.
Unlike futures, spot ETFs are backed by the underlying asset, meaning that funds must buy XRP to offer them. This could increase demand, boost its price, and provide greater exposure to the institutional market.
Canary Capital, 21Shares, Bitwise, Grayscale, Franklin Templeton, and CoinShares are some of the companies that have submitted applications to the SEC to list their respective ETFs. So far, the agency now led by Paul Atkins has not provided a response.
