Bitcoin futures on the CME reportedly hit an all-time low owing to extremely bearish sentiment

By: Henry Felix

August 27, 2022 7:47 AM

According to fresh data, traders of derivatives have grown notably more cautious this month compared to last.

As mood among derivatives traders deteriorates, historic discounts are beginning to be seen in Bitcoin (BTC) futures.

Analysis company Arcane Research offered a concerning picture of the mood among BTC futures participants in its most recent dedicated study, which was released on August 23.

Futures basis goes back to the June lows

Bitcoin derivatives have changed since the initial shock of the BTC price decline in June, which has now held as a macro bottom.

Metrics are declining after a brief uptick, and this month is breaking records.

The futures basis, which measures the discrepancy between futures contract pricing and the spot price of Bitcoin, has already returned to lows last seen in June's decline to $17,600. The action was prompted by last week's abrupt decline in the price of bitcoin against the dollar, which led to numerous dips below the $21,000 level.

According to Arcane, the data is "indicative of a strong pessimistic view among futures traders," adding that "overall, the present futures basis sits at levels only briefly encountered during the June crisis."

The front-month futures contract pricing from CME Group provides even more depressing data.

Those options are currently trading at their biggest-ever discount to spot price, surpassing previous lows from July 2021.

According to the research, "overall, CME's futures have tended to trade at a discount in the last two months," before experiencing "a robust short-lived recovery" during the early August surge in the market.

Chart for CME Bitcoin futures on a rolling 1-month basis (screenshot). Research from Arcane Sources

Although "structural effects" in the derivatives market, according to Arcane, could partially explain the behavior, there was still a risk from "worsening liquidity or overall de-risking."

The report's conclusion read: "While BTC derivatives might imply a climate suitable for a short squeeze, the choppy trading range accompanying the upheaval in the global markets argues in favor of cautious positioning and slow accumulation in the spot market."

GBTC remains close to record lows.

The largest institutional Bitcoin investment vehicle, however, is still having trouble after US regulators turned down its request for an exchange-traded fund (ETF) tracking the Bitcoin spot price in June.

The Grayscale Bitcoin Trust (GBTC) is still selling at a discount of over 30% to the current market price of one bitcoin.

Signs of a trend change are still difficult, according to investor and researcher Jeroen Blokland.

At some point, I believe regulators will greenlight "physical" Bitcoin ETFs. Although it doesn't seem imminent in light of the most recent SEC decision, futures ETFs do pose risks, he claimed this week.

In contrast to GBTC, Blokland claimed that institutional investors were "massively" adopting other BTC exposure choices.

GBTC premium versus asset holdings versus a chart of BTC/USD. Source: Coinglass