2024 is off to a great start according to CME Bitcoin futures data, but not every derivatives market supports the current bullishness.
The Chicago Mercantile Exchange Bitcoin (BTC) futures traded at $47,040 in the early hours of Jan. 2, $1,600 above the spot markets. Traders are now questioning whether the spike was limited to CME futures and if it signals an impending Bitcoin price rally.
Some analysts speculate that the premium was caused by institutional investors anticipating the approval of a spot Bitcoin exchange-traded fund (ETF) by regulators, although the decision is still pending. Senior Bloomberg analysts estimate the odds of ETF approval by the U.S. Securities and Exchange Commission (SEC) at 90%, which explains part of investors’ recent optimism.
In healthy markets, monthly futures contracts typically trade with a 5% to 10% basis rate to account for longer settlement time. This situation, known as contango, is not unique to cryptocurrency derivatives. It’s worth noting that between January 2023 and November 2023, the CME Bitcoin futures had a very low premium relative to BTC spot markets, with intraday highs rarely exceeding $350, equivalent to 14% in annualized terms.