25 Oct 2021

Futures premium spiked as bitcoin reached a new all-time high

The futures basis climbed this week, coinciding with the launch of the ProShares ETF and a new bitcoin all-time high.
CME saw a very sharp rise in its basis this week, caused by massive buying pressure due to the BITO ETF launch. The three-month basis reached a high of 16% before declining towards 12%. CME is now the largest exchange in the bitcoin futures market measured by open interest after surpassing Binance. This is driven by buying pressure from the ETF launch. This buying pressure creates attractive cash-and-carry opportunities. According to the latest COT report from the CME, the short-interest from leveraged funds has never been higher in bitcoin. This is likely motivated by the cash-and-carry opportunities, not a short bias. The basis also spiked on the offshore derivatives exchanges this week, with the basis nearing highs of 20% as bitcoin pushed above the all-time high from April. The push above the former all-time high caused a short-term exuberance in the futures market. But, as the momentum calmed, and the Binance.US flash crash occurred (slide 9), the basis saw a sharp decline. However, the basis remains at levels not seen since May, indicating a substantial long bias among traders. Nevertheless, the basis is still far below the extreme peaks of 50% seen in April.
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