·

Futures traders anticipating further declines even after Bitcoin’s colossal drop

Futures traders anticipating further declines even after Bitcoin’s colossal drop

Back-month Bitcoin futures contracts are trading at a steep discount to spot on the leading exchanges, indicating that derivatives traders could have low expectations for a price recovery after the coin’s recent capitulation.

The basis, which measures the premium or discount between the spot price and the futures price, is often considered a useful gauge of sentiment in the futures market. When futures contracts have a negative basis on back months, it generally indicates traders are bearish on the asset and will be more liable to short the spot market. 

The BTC futures contracts for March and June are trading at a significantly negative basis (a.k.a. “backwardation”) on BitMEX, Deribit, FTX, Huobi, and OKEx, five of the largest leveraged Bitcoin derivatives venues. 

BTC futures annualized basis percentage
BTC Futures & Basis vs Spot (Source: Skew)

Astonishingly, some of the contracts on BitMEX and Deribit are trading so far below spot price that their annualized discount to spot is almost 60 percent — hundreds of dollars below the current price of Bitcoin. Deribit’s March contract, for example, is trading at roughly $5,150, $110 lower than the BTC/USDT pair on Binance

BTC futures annualized basis percentage
BTC futures annualized basis percentage (Source: Skew)

The Bakkt physically settled contract has also lurched into backwardation, to the extent Bakkt traders currently have an annual loss of 592 percent on their positions, according to data from IntotheBlock

The turnover ratio of these five major exchanges is still higher than usual after the immense sell-off seen over Thursday and Friday, suggesting that Bitcoin’s recent volatility could continue.

But there are two correlated metrics that suggest the market may have seen the worst of Bitcoin’s sell-off and are a little more encouraging for the prospects of a recovery.

Open interest has dropped sharply across all the BTC futures venues, shrinking to an all-time-low on the regulated CME contract. This indicates a weakening of bearish momentum, and, when considering net open interest on CME for leveraged funds, it looks like institutional speculators have sharply eased off on their short positions.

CME Bitcoin leveraged fund net open interest
CME leveraged fund net open interest (Source: Skew)

Bitcoin | BTC

Updated: Apr 6 at 1:18 am UTC
$5,296.07
-2.36%

Bitcoin, currently ranked #1 by market cap, is down 2.36% over the past 24 hours. BTC has a market cap of $96.77B with a 24 hour volume of $33.21B.

Chart by CryptoCompare

Bitcoin is down 2.36% over the past 24 hours.

Posted In: , Analysis, Derivatives, Price Watch

The above advertisement is an referral link.

Invest with AMFEIX

Like what you see? Subscribe to CryptoSlate

Get our daily newsletter containing the top blockchain stories and crypto analysis straight to your inbox.

Sign up to stay informed
Jonnie Emsley
Author

Jonnie Emsley

Fintech Journalist @ CryptoSlate

Jonnie is a writer and blockchain enthusiast based in Ho Chi Minh City, Vietnam. Discovering new corners of the world and emerging tech trends makes him tick.

View author profile

Commitment to Transparency: The author of this article is invested and/or has an interest in one or more assets discussed in this post. CryptoSlate does not endorse any project or asset that may be mentioned or linked to in this article. Please take that into consideration when evaluating the content within this article.

Disclaimer: Our writers' opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.