Bitcoin (BTC) futures at the Chicago Mercantile Exchange, one of the world’s biggest derivatives markets, just traded at the largest discount to spot prices in at least 2 1/2 years after a big market plunge and right before August contracts expire.
Arcane Research keeps tabs on the average difference between CME’s front-month bitcoin futures – those expiring soonest – and the current market price for bitcoin itself for rolling one-month periods. On Monday, that showed front-month futures at a 3.36% discount. That’s a record low in the firm’s dataset that goes back to Jan. 1, 2020 – though CME bitcoin futures have been trading since December 2017.
That surpassed the previous low of minus 2.39% set on July 21, 2021, which was followed by a hefty short squeeze, according to Arcane.
CME futures have traded at a discount over the last two months but witnessed a short-lived recovery at the start of the month when there was some momentum in the market. Early in August, bitcoin briefly reached $25,000. But it sank below $21,000 on Aug. 19.
“The growing discounts in the front-month contracts might be explained in part by structural effects,” Vetle Lunde, an analyst at Arcane Research, said in a report.
The report said the ProShares Bitcoin Strategy ETF (BITO) has begun rolling its August contracts into contracts that expire later, possibly causing downward pressure on the front-month contracts. Monday, BITO rolled over 1,000 August contracts and will roll over a further 3,000 August contracts by Friday. Previous times when the exchange-traded fund rolled over exposures, front-month contracts have tended to move toward discounts to spot, according to Arcane.
“Still, such extreme discounts have not appeared during previous rolling periods,” Lunde said. “They might be a symptom of worsening liquidity or general de-risking as S&P 500 and Nasdaq see a tumultuous start to the week while the dollar strength index pushes towards new highs.”
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