Uncertainty prevails as December 2021 Bitcoin futures show an inverted pattern

Uncertainty prevails as December 2021 Bitcoin futures show an inverted pattern

The inverted pattern in the Bitcoin futures curve is a signal that investors’ confidence in BTC price continues to slump.

It’s not yet known whether Binance’s recent news of  being temporarily suspended from the U.K.’s financial system is the main driver behind today’s Bitcoin (BTC) price drop. As Cointelegraph reported, the exchange sent emails to affected customers but has not given any details.

Regardless of the reason behind the price weakness, derivatives contracts started to display some oddities, and this could be a troubling sign.

Bitcoin quarterly futures are the preferred instruments of whales and arbitrage desks. Although it might seem complicated for retail traders due to their settlement date and price difference from spot markets, their most significant advantage is the lack of a fluctuating funding rate.

When traders opt for perpetual contracts (inverse swaps), there is a fee usually charged every 8-hours that will change depending on which side demands more leverage. On the other hand, fixed-date expiry contracts typically trade at a premium from regular spot market exchanges.

This effect occurs as sellers are postponing settlement, therefore requesting compensation for this time.

Bitcoin futures annualized premiums. Source: BitcoinFuturesInfo.com

As depicted above, the Sept. 24 contract is trading with a 2.2% annualized premium at Deribit, while the Dec. 31 contract is at 3.8%. This curve is precisely what one should expect in healthy markets because a longer settlement period would usually cause sellers to request a more substantial premium.

Keep in mind that there’s a decent ‘Cash and Carry’ activity being deployed by arbitrage desks, buying Bitcoin while simultaneously shorting (selling) the futures contract. These players aren’t effectively betting on a negative price swing as their net exposure is flat, but this activity limits the premium on futures contracts.

Related: Bitcoin price is down, but here’s 3 reasons why $1B liquidations are less frequent

Focus on the broader picture, is the 3-month premium below 4%?

Therefore, a couple of exchanges presenting a flat or slightly inverted futures’ curve should not be interpreted as a bearish indicator. More importantly, investors should measure the 3-month futures premium, which should stay above 4% annualized.

Whenever this metric falls below that, it indicates a lack of interest in leverage longs and is interpreted as bearish.

Currently, the average September annualized basis (premium) of the four exchanges examined is running at 3.3%, which is definitively worrisome.

However, this is not unusual after the market experienced a 50% correction. This situation should simply be interpreted as a lack of confidence from buyers instead of an alarming bearish sign.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

  • Bitcoin
  • Ethereum
  • Tether
  • Cardano
  • Polkadot
  • Binance coin
  • Dogecoin
Scan to Donate Bitcoin to 194astnfvj2nr6izGJFwG9ebRqNU7ynQYY

Donate Bitcoin to this address

Scan the QR code or copy the address below into your wallet to send some Bitcoin

Scan to Donate Ethereum to 0xe5853a1d08b3ea0bb69276b0e40cdf858968d822

Donate Ethereum to this address

Scan the QR code or copy the address below into your wallet to send some Ethereum

Scan to Donate Tether to 0xe5853a1d08b3ea0bb69276b0e40cdf858968d822

Donate Tether to this address

Scan the QR code or copy the address below into your wallet to send some Tether

Scan to Donate Cardano to DdzFFzCqrhsu1xWeeGai3gbgsbrFP26zPaVrCJqqF286carQJmAkTitRQSUCLhYLpKCotroRRNpKj7YcnAJQqpSfsHHdj8nUaitPvH4j

Donate Cardano to this address

Scan the QR code or copy the address below into your wallet to send some Cardano

Scan to Donate Polkadot to 155rGKVEanCxpi5EqGh8yh1AkGpm6bVUa7RQNydA38KzbhNu

Donate Polkadot to this address

Scan the QR code or copy the address below into your wallet to send some Polkadot

Scan to Donate Binance coin to bnb136ns6lfw4zs5hg4n85vdthaad7hq5m4gtkgf23

Donate Binance coin to this address

Scan the QR code or copy the address below into your wallet to send some Binance coin

Tag/Note:- 105346725
Scan to Donate Dogecoin to DKN9sscVgSBVyG7f9PYJq2D3BhWK5ffUmK

Donate Dogecoin to this address

Scan the QR code or copy the address below into your wallet to send some Dogecoin


Credit: Source Link

Comments are closed.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Privacy & Cookies Policy
WP Twitter Auto Publish Powered By : XYZScripts.com