CME Bitcoin futures are trading at a discount, but is that a good or bad thing?

Bitcoin Futures (BTC) on the Chicago Mercantile Exchange (CME) from November 9. trades below the Bitcoin spot price on regular exchanges, a situation technically known as “backlog”. While this indicates a bear market structure, there are several factors that can cause short-term distortions.

Typically, these CME fixed-month contracts trade at a slight premium, indicating that sellers are asking for more money to hold liquidation longer. Hence, futures should trade at a 0.5% to 2% premium in healthy markets. This situation is called “contango”.

Nevertheless, leading seller futures contracts will cause an instantaneous distortion of the futures premium. Unlike forward contracts, these fixed-calendar futures do not have a funding rate, so their price can differ significantly from spot exchanges.

Aggressive sellers took a 5% discount on BTC futures

As long as there is aggressive activity by shorts (sellers), the two-month futures contract will trade at a discount of 2% or more.

CME Bitcoin 1 Month Futures Prime vs. BTC index. Source: TradingView

Note how one-month CME futures were trading close to their true value, giving a 0.5% discount or 0.5% premium to spot exchanges. Nevertheless, November 9 during the Bitcoin price crash, aggressive futures traders forced CME futures to trade 5% below the normal market price.

The current discount of 1.5% is still atypical, but can be explained by the risk of contagion it poses FTX and Alameda Research bankruptcy. The group is believed to have been one of the biggest shapers of the cryptocurrency market, so its collapse should have sent shockwaves through all crypto-related markets.

Insolvency has Major over-the-counter trading centers have been severely affected, investment funds and lending services such as Genesis, BlockFi and Galois Capital. As a result, traders should expect less arbitrage activity between CME futures and the remaining spot exchanges.

Cryptocurrencies: Bitcoin Value Today

The negative impact was exacerbated by the lack of market makers

As market makers attempt to reduce their exposure and assess counterparty risk, potential oversupply of long and short CME contracts will naturally distort futures premiums.

Contract backlog is a key indicator of a dormant and bearish derivatives market. This movement can occur during liquidation orders or when large players decide to short the market using derivatives. This is especially true when there is an increase in open interest, as new duties are created in such unusual circumstances.

On the other hand, excessive discounting will create an arbitrage opportunity, as you can buy a futures contract and at the same time sell the same amount in the spot (or margin) markets. This is a market neutral strategy commonly known as “invest cash and carry”.

Institutional investor interest in CME futures continues

Interesting, Open interest in CME Bitcoin futures hit a four-month high on November 10. This data measures the total size of buyers and sellers using CME derivatives contracts.

CME Bitcoin Futures Open Interest, USD. Source: Coinglass

Note that the record value of $5.45 billion was reached in 2021. on October 26, but Bitcoin was close to $60,000 at the time. Therefore, in 2022 November 10 CME futures interest 1.67 billion.

Traders often use open interest as an indicator of trends or at least the appetite of institutional investors. For example, an increase in the number of futures contracts in circulation is often interpreted as the entry of new money into the market, regardless of bias.

Bitcoin has broken a two-week slump and is above $20,000

Although this data cannot be considered advanced, it shows that the interest of professional investors in Bitcoin is not waning.

As further evidence, note that the open interest chart above shows that savvy investors have not shorted their positions in Bitcoin derivatives, despite what critics have said about the cryptocurrency.

Given the uncertainty surrounding the cryptocurrency markets, traders should not assume that a 1.5% discount on CME futures represents a long-term bearishness.

There is no doubt that the demand for shorts is, however, the lack of appetite among market makers is the main factor behind the current distortion.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of All investments and transactions involve risk, so you should do your own research before making a decision.

Investments in cryptocurrency assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed at or available to investors in Spain.


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