It\u2019s a new record for the CME. The Chicago Mercantile Exchange\u2019s front-month contracts exhibit a large discount compared to bitcoin\u2019s spot market price. These are the futures contracts that are soon to expire. The CME\u2019s quarterly contracts tend to trade at a minimum premium, and this kind of discount for front-month contracts is not usual. They\u2019ve been trading at a discount for a couple of months, but they reclaimed a premium with the market recovery at the beginning of August. As we all know, that didn\u2019t last.<\/p>\n
The CME futures contracts on bitcoin have been available since December 2017. The CME\u2019s front-month contracts haven\u2019t traded this low since July 21st of 2021, more than a year and a half ago. At that time, a hardcore short squeeze followed the phenomena. The liquidation amounted to more than $750 million worth of shorts, \u201cleading the open interest denominated in bitcoin to fall by 47,000 BTC,\u201d Arcane Research tweeted.<\/p>\n
A couple of interesting charts from this week:$757 million worth of shorts was liquidated yesterday, leading the open interest denominated in bitcoin to fall by 47,000 BTC.<\/p>\n
Sources: @bybt_com, @skewdotcom, and @tradingview pic.twitter.com\/XGcpO4jmSq<\/p>\n
\u2014 Arcane Research (@ArcaneResearch) July 27, 2021<\/p>\n\n
In the most recent \u201cThe Weekly Update\u201d report, Arcane Research tackled the CME futures situation:<\/p>\n
\u201cThe futures basis on CME\u2019s most traded BTC contract, the front-month futures contract, is trading in sharp backwardation as the annualized basis reached an all-time low yesterday, averaging at -3.36%.\u201d<\/p>\n\n
CME BTC Futures Annualized Rolling 1-Month Basis | Source: The Weekly Update
\nWhy Are CME Futures Trading This Low?<\/p>\n
There are macro factors, like the bitcoin futures market showing signs of market exhaustion. We at NewsBTC explained the situation as follows:<\/p>\n
\u201cThe reason behind the bitcoin futures premiums being down can be attributed to sell-offs that have rocked the digital asset in recent times. Not only have the sell-offs been apparent in investors who are directly exposed to the cryptocurrency but those who have exposure through traditional markets vehicles like ETFs have been selling off too.\u201d<\/p>\n\n
BTC futures on CME for 08\/25\/2022 | Source: TradingView.com<\/p>\n
However, Arcane Research\u2019s \u201cThe Weekly Update\u201d also identifies very specific factors. These are related to the present and the ProShares Bitcoin Strategy ETF or BITO:<\/p>\n
\u201cThe growing discounts in the front-month contracts might be explained in part by structural effects. BITO has begun rolling their August contract exposure, possibly causing downward pressure on the front-month contracts. Yesterday, BITO rolled over 1000 August contracts and will roll over a further 3000 August contracts by Friday. Previous rolling periods have tended to be accompanied by a declining front-month basis.\u201d<\/p>\n
In any case, we can\u2019t discard the situation as a normal occurrence. The discount is too steep. According to Arcane Research, it might be related to the disastrous start of the week for Nasdaq and the S&P 500. Or to the dollar gaining strength. Or to a general lack of liquidity. One thing\u2019s for sure, something\u2019s going on. <\/p>\n
Featured Image by Markus Spiske on Unsplash | Charts by TradingView and The Weekly Update<\/p>","protected":false},"excerpt":{"rendered":"
<\/p>\n
It\u2019s a new record for the CME. The Chicago Mercantile Exchange\u2019s front-month contracts exhibit a large discount compared to bitcoin\u2019s spot market price. These are the futures contracts that are soon to expire. The CME\u2019s quarterly contracts tend to trade at a minimum premium, and this kind of discount for front-month contracts is not usual. They\u2019ve been trading at a discount for a couple of months, but they reclaimed a premium with the market recovery at the beginning of August. As we all know, that didn\u2019t last.<\/p>\n
The CME futures contracts on bitcoin have been available since December 2017. The CME\u2019s front-month contracts haven\u2019t traded this low since July 21st of 2021, more than a year and a half ago. At that time, a hardcore short squeeze followed the phenomena. The liquidation amounted to more than $750 million worth of shorts, \u201cleading the open interest denominated in bitcoin to fall by 47,000 BTC,\u201d Arcane Research tweeted.<\/p>\n
A couple of interesting charts from this week:$757 million worth of shorts was liquidated yesterday, leading the open interest denominated in bitcoin to fall by 47,000 BTC.<\/p>\n
Sources: @bybt_com, @skewdotcom, and @tradingview pic.twitter.com\/XGcpO4jmSq<\/p>\n
\u2014 Arcane Research (@ArcaneResearch) July 27, 2021<\/p>\n
In the most recent \u201cThe Weekly Update\u201d report, Arcane Research tackled the CME futures situation:<\/p>\n
\u201cThe futures basis on CME\u2019s most traded BTC contract, the front-month futures contract, is trading in sharp backwardation as the annualized basis reached an all-time low yesterday, averaging at -3.36%.\u201d<\/p>\n
CME BTC Futures Annualized Rolling 1-Month Basis | Source: The Weekly Update
\nWhy Are CME Futures Trading This Low?<\/p>\n
There are macro factors, like the bitcoin futures market showing signs of market exhaustion. We at NewsBTC explained the situation as follows:<\/p>\n
\u201cThe reason behind the bitcoin futures premiums being down can be attributed to sell-offs that have rocked the digital asset in recent times. Not only have the sell-offs been apparent in investors who are directly exposed to the cryptocurrency but those who have exposure through traditional markets vehicles like ETFs have been selling off too.\u201d<\/p>\n
BTC futures on CME for 08\/25\/2022 | Source: TradingView.com<\/p>\n
However, Arcane Research\u2019s \u201cThe Weekly Update\u201d also identifies very specific factors. These are related to the present and the ProShares Bitcoin Strategy ETF or BITO:<\/p>\n
\u201cThe growing discounts in the front-month contracts might be explained in part by structural effects. BITO has begun rolling their August contract exposure, possibly causing downward pressure on the front-month contracts. Yesterday, BITO rolled over 1000 August contracts and will roll over a further 3000 August contracts by Friday. Previous rolling periods have tended to be accompanied by a declining front-month basis.\u201d<\/p>\n
In any case, we can\u2019t discard the situation as a normal occurrence. The discount is too steep. According to Arcane Research, it might be related to the disastrous start of the week for Nasdaq and the S&P 500. Or to the dollar gaining strength. Or to a general lack of liquidity. One thing\u2019s for sure, something\u2019s going on. <\/p>\n
Featured Image by Markus Spiske on Unsplash | Charts by TradingView and The Weekly Update<\/p>\n
<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"colormag_page_layout":"default_layout","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[82],"tags":[],"class_list":["post-6290","post","type-post","status-publish","format-standard","hentry","category-blockchain"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/posts\/6290","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/comments?post=6290"}],"version-history":[{"count":0,"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/posts\/6290\/revisions"}],"wp:attachment":[{"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/media?parent=6290"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/categories?post=6290"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/cryptocornercafe.com\/cafe\/wp-json\/wp\/v2\/tags?post=6290"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}