The Chicago Mercantile Exchange (CME) Bitcoin (BTC) futures have been trading below Bitcoin’s spot price on regular exchanges since Nov. 9, a situation that is technically referred to as backwardation. While it does point to a bearish market structure, there are multiple factors that can cause momentary distortions.
Typically, these CME fixed-month contracts trade at a slight premium, indicating that sellers are requesting more money to withhold settlement for longer. As a result, futures should trade at a 0.5% to 2% premium in healthy markets, a situation known as contango.
However, a prominent futures contract seller will cause a momentary distortion in the futures premium. Unlike perpetual contracts, these fixed-calendar futures do not have a funding rate, so their price may vastly differ from spot exchanges.
Aggressive sellers caused a 5% discount on BTC futures
Whenever there’s aggressive activity from shorts (sellers), the two-month futures contract will trade at a 2% or higher discount.
Notice how 1-month CME futures had been trading near the fair value, either presenting a 0.5% discount or 0.5% premium versus spot exchanges. However, during the Nov. 9 Bitcoin price crash, aggressive futures contracts sellers caused the CME futures to trade 5% below the regular market…
