ETH: Buying in the DipMBT1!/MET1!CME_DL:MBT1!/CME_DL:MET1!JimHuangChicagoCME: Micro Ether Futures ( MET1!), #microfutures On May 22nd, #Bitcoin reached a new all-time high of $111,814. The king of cryptos rallied as bullish sentiment built up behind the most pro-crypto U.S. administration. As of last Friday, bitcoin realized a one-year return of +90.8%. For comparison, holding S&P 500 only yields 11.8% for a year, even after the US stock index made its ATH last week. Meanwhile, #Ethereum, second only to Bitcoin in the cryptocurrency world, experienced a dramatic decline in 2025. ETH is currently trading around $2,500, down 40% since December. It is a far cry from its ATH of $4,815 on November 9, 2021. Why Is Ethereum (ETH) Falling? The most significant challenge facing Ethereum is the proliferation of Layer 2 scaling solutions. Networks such as Arbitrum, Base, and Optimism were developed to address Ethereum's scalability issues, but they've created a revenue problem for the main chain. When users conduct transactions on these Layer 2 networks, transaction fees flow to third-party organizations rather than to the Ethereum network itself. Revenue diversion has weakened Ethereum's economic model. Ethereum could counter the revenue erosion by implementing a fee on Layer 2 transactions. However, it would undermine the very purpose of these networks. Layer 2 solutions were designed specifically to reduce transaction costs by processing operations off-chain and submitting only batched results to the main network. Adding fees would increase costs and diminish their competitive advantage. Increased competition in the blockchain space has further eroded Ethereum’s dominance. Investors have been withdrawing funds from Ethereum and redirecting them to competing projects with potentially better returns or technological advantages. Future Outlook Ethereum’s path forward appears challenging. While the platform still hosts thousands of decentralized applications and maintains a large developer community, its economic model is under pressure from multiple directions. Without finding new ways to generate value, Ethereum may continue to lose market share to more nimble competitors. The platform’s supporters point to upcoming technical improvements and the maturation of the proof-of-stake consensus mechanism as potential catalysts for recovery. The recent approval of staking enabled ETF for Ethereum in Hong Kong is one of the ways forward. However, with increasing competitive pressures, Ethereum faces an uphill battle to reclaim its former status as the undisputed leader in smart contract platforms. While the future remains challenging, Ethereum still has upside potential at the current price level. As ETH dropped below $1,500 in April, bargain hunters came in to scoop it up. As a result, ETH had a spectacular rebound of 70% in the last three months, outrunning Bitcoin’s 25% gain for the same period. There are over 17,000 cryptocurrencies in existence, according to Coin Gecko. However, only a handful of them have proven to have a lasting investment value. We could refer to Bitcoin and Ethereum as the digital form of Gold and Silver. Historical trend shows that the spike in gold prices would likely prompts investors to buy silver at a lower cost, helping maintain a stable Gold/Silver price ratio. The same could be true for the BTC/ETH relationship. For extensive reading, please refer to my Editors’ Picks, The Gold-Silver Ratio Explained, published on TradingView on April 28th. https://www.tradingview.com/chart/GC1!/jZHK75uF-The-Gold-Silver-Ratio-Explained/ Recent regulations on #stablecoins in the US and Hong Kong are good news to the crypto space. It legitimates crypto offerings from mainstream financial institutions. Bitcoin is positioned for another big lift as investors reallocate assets into cryptos. On July 4th, President Trump signed into law the “Big and Beautiful Bill”. Above all, this massive package funds deficit spending and raises the national debit by $5 trillion. While we will carry the debt burden for many years, in the short run, injecting huge liquidity into the economy and the financial market would pop up asset prices. The latest CFTC Commitments of Traders report shows that, as of June 24th, the total open interest for Micro Ether futures are 128,500 contracts. •Leverage Fund has 94,167 in long, 112,442 in short, and 1,854 in spreading •The long-short ratio of 0.84 does not provide a good indication of what the “Smart Money” views about Ethereum. In summary, I hold the view that ETH may regain ground above 3,300 before year end. Investors sharing this bullish view could explore CME’s Micro Ether Futures (MET). Long Futures with Stop Loss Last Friday, the August Ether Futures contract (METQ5) was settled at 2,518. Each contract has a notional value of 0.1 ETH, or a market value of $251.8. To buy or sell 1 contract, a trader is required to post an initial margin of $84. The margining requirement reflects a built-in leverage of 3-to-1. It’s cost-effective to invest with CME MET futures, vs. buying ETH from the spot market. Let’s use a hypothetical trade to illustrate how the long futures with stop loss strategy would compare with buying spot ETH. Hypothetical Trade: •Buy 1 METQ5 contract at 2,518, and set a stop loss at 2,400 •Trader pays $84 for initial margin High Price Scenario: Ethereum rises to $3,000 •Futures gain will be $48.2 (= (3000-2518) x 0.1) •Futures return will be +57.4% (= 48.2 / 84) •This compares to a 19.1% for investing in spot ETH. (= (3000 /2518) – 1) Low Price Scenario: Ethereum drops to $2,000 •Futures stop loss at 2,400, and the maximum loss is $11.8 (= (2518-2400) x 0.1) •Futures return will be -14% (=11.8 /84) •This compares to a 20.6% loss for investing in spot ETH. (= (2000 /2518) – 1) The above scenarios show that •When ETH goes up, futures will have higher returns due to its leverage nature. •When ETH falls, the stoploss will kick in to reduce losses. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs https://www.tradingview.com/cme/