The premium in Bitcoin futures on the Chicago Mercantile Exchange (CME) has decreased significantly, indicating lower institutional interest.
The annualized premium for rolling three-month futures has fallen to 4.3%, the lowest since October 2023. This marks a substantial decline from earlier highs exceeding 10% earlier this year.
This decrease in the so-called basis, despite Bitcoin’s price remaining above $100,000, reflects diminished optimism and uncertainty regarding future price movements.
The decline correlates with a reduction in funding rates in perpetual futures on major offshore exchanges. Recent data shows funding rates turning negative, indicating a discount in perpetual futures compared to the spot price, suggesting a bearish outlook among traders.
The shrinking price differential poses challenges for those attempting non-directional cash-and-carry arbitrage, which involves purchasing spot ETFs and shorting CME futures simultaneously.
“When yield spreads fall below a 10% threshold, Bitcoin ETF inflows are primarily driven by directional investors rather than arbitrage-focused hedge funds. This often coincides with price stabilization. Current spreads have dropped to 1.0% (perpetual futures funding rate) and 4.3% (CME basis rate), indicating a notable decrease in hedge fund arbitrage activity,” said Markus Thielen, founder of RialCenter.
Thielen mentioned that this drop aligns with low retail activity, as indicated by reduced perpetual funding rates and spot market volumes.
Padalan Capital echoed this sentiment in a weekly update, referring to the decrease in funding rates as a signal of diminished speculative interest.
“A more pronounced indication of risk-off positioning comes from regulated venues, where the CME-to-spot basis for both Bitcoin and Ethereum has shifted to deeply negative territory, indicating aggressive institutional hedging or a significant reversal of cash-and-carry structures,” Padalan Capital noted.
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