Bitcoin futures in December 2021 show a reversal pattern, and uncertainty prevails


It’s not clear whether Binance’s recent news Was temporarily suspended in the UK financial system It is the main driving force behind the decline in the price of Bitcoin (BTC) today. As Cointelegraph reported, the exchange sent emails to affected customers but did not provide any details.

Regardless of the reason behind the price weakness, derivatives contracts are beginning to show some strange phenomena, which may be a disturbing sign.

Bitcoin quarterly futures are the tool of choice for whales and arbitrage platforms. Although retail traders may seem complicated due to settlement dates and price differences with the spot market, their most significant advantage is the absence of fluctuating financing rates.

When a trader chooses a perpetual contract (reverse swap), a fee is usually charged every 8 hours, and the fee will vary according to which party needs more leverage. On the other hand, contracts that expire on a fixed date are usually traded at a premium in regular spot market transactions.

This effect occurred when the seller delayed the settlement, so compensation was required this time.

Annualized premium for Bitcoin futures. Source: BitcoinFuturesInfo.com

As mentioned above, the annualized premium for the September 24 contract at Deribit is 2.2%, while the December 31 contract is 3.8%. This curve is exactly what people should expect in a healthy market, because a longer settlement period usually results in sellers demanding higher premiums.

Remember that arbitrage counters are deploying a decent “cash and carry” activity to short (sell) futures contracts while buying bitcoin. Because of the flat net exposure, these participants did not effectively bet on negative price fluctuations, but this activity limits the premium on futures contracts.

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Focusing on the overall situation, is the 3-month premium lower than 4%?

Therefore, the flat or slightly inverted futures curve of some exchanges should not be interpreted as a bearish indicator. More importantly, investors should measure the 3-month futures premium, and the annualized premium should remain above 4%.

Whenever the indicator falls below this indicator, it indicates a lack of interest in leveraged bulls and is interpreted as bearish.

Currently, the average annualized basis (premium) of the four exchanges examined in September is 3.3%, which is absolutely worrying.

However, this is not uncommon after the market has experienced a 50% correction. This situation should be simply explained as a lack of confidence in buyers, rather than a worrying bearish signal.

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