25 Jul 2022

Growing futures premiums on CME, but traders still exercise caution

The basis premium on CME has grown slowly and steadily for two weeks, while the offshore basis premium has stagnated.
The basis premium on CME has grown by almost 1% over the past seven days, signaling increased optimism among institutional futures traders.After its recent growth, the basis premium on CME surpassed that of Binance, which saw a major decline over the past seven days.
Source: Skew
Basis premiums are now sitting at similar levels on CME and the offshore exchanges, indicating that the market sentiment is balanced among different groups of traders.While the basis premium on CME has grown, it’s still just 2.2%, a relatively low level historically. This indicates that although sentiment is improving, traders still exercise caution.
Funding rates for bitcoin perps falls below neutral
After briefly visiting neutral territory at 0.01%, funding rates are now back below neutral.Bitcoin’s recovery over the past two weeks ignited optimism among perp traders, showcased by funding rates normalizing at neutral levels. The funding rates have since fallen straight back below neutral territory as traders exercise caution amid a retracting bitcoin price.Still, funding rates are considerably higher than for most of June when contagion effects ravaged the market. The market sentiment has clearly improved since then, which is also evident when looking at the increase of the Fear and Greed Index.
Source: Skew, Bybit
Open interest remains elevated in BTC terms, indicating high leverage. This high leverage makes the market vulnerable to either a short or long squeeze should a significant price movement occur on either side.
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