19 Jul 2022

Offshore premiums see slow and steady growth

The relief in the market is reflected in growing futures premiums. Offshore premiums align with early July levels but remain compressed, suggesting a prudent sentiment.
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As seen in late June, BTC pushing towards the higher end of its consolidation range contributes to elevating the futures basis, suggesting a growing willingness to long amid strength.
Source: Skew *Closed Saturday - Sunday
This has contributed to lifting the offshore basis above 2%, in line with the premiums seen in early July. Still, while this suggests an improved sentiment, these premiums remain near historic lows. CME’s basis, on the other hand, remains flat compared to last week, trailing near 1.5% as institutional traders still remain cautious on adding exposure. CME’s sluggish basis is impacted by outflows from BITI equivalent to 1265 BTC in the last week, creating some sell-side pressure in the CME futures.Overall, the futures basis remains largely unchanged, with minor daily variations. The slight and steady increase over the last week offshore suggests a gradually improving sentiment as momentum strengthens.
Funding rates reaches neutral levels as market conditions normalize
As BTC regains its trading range highs, funding rates have normalized at neutral levels. The funding rates at Binance and Bybit have reached neutral levels of 0.01% as BTC recovers towards range highs.
Source: Skew, Bybit
This is the first occurrence of sustained neutral funding rates in perps since early June, and it suggests that sentiment is improving.It further indicates that uncertainty related to bankruptcies and contagion is reduced in the market, with more market participants willing to long, leading perp prices to align with spot. Open interest in perps saw a sharp uptick Monday morning but then declined substantially as BTC pushed below $22,000. The current BTC denominated open interest in BTC perps aligns with the levels reported last week. Thus, leverage remains elevated, albeit with few alarming developments during the recent strength.
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