Bitcoin futures premium on CME falls to lowest level since October 2023, hinting at weaker institutional demand.
- Bitcoin CME futures premium drops to 4.3%, down from over 10% earlier this year
- Negative funding rates suggest more traders are betting against Bitcoin price
- Lower yields reduce attraction for hedge fund arbitrage strategies
Bitcoin Futures Premium Hits 8-Month Low
The premium on three-month Bitcoin futures at the Chicago Mercantile Exchange (CME) has fallen to 4.3%, according to 10x Research. This is the lowest level since October 2023. The premium had been over 10% earlier this year. A shrinking premium shows less excitement among big investors about Bitcoin’s future price.
Negative Funding Rates Signal Bearish Outlook
Funding rates for perpetual Bitcoin futures on offshore exchanges have turned negative. This means traders are willing to pay to stay short, or bet that Bitcoin’s price will fall. A negative rate also shows that fewer people are confident in a strong price rally soon. This trend matches what is happening on CME, where the futures premium is falling.
Hedge Funds Losing Interest in Arbitrage
The drop in futures premiums and funding rates is hurting a trading method called cash-and-carry arbitrage. In this strategy, traders buy Bitcoin spot ETFs and sell futures at a premium to lock in profit. But now, with yields below the 10% mark, this strategy is less attractive. Markus Thielen of 10x Research said spreads are now down to just 1.0% on perpetual futures and 4.3% on CME futures.
Retail Trading and Volume Remain Low
Retail traders are also not very active. Spot trading volume remains low. This shows that both small and large investors are taking a careful approach. According to Padalan Capital, the shrinking funding rates and basis spreads on regulated exchanges show a pullback in risky bets. They say many institutions may be hedging their positions or closing out trades.
Source: coindesk.com
