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Bitcoin Futures in Backwardation, Here's What It Means for Traders

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Fri, 25/11/2022 - 15:24
Bitcoin Futures in Backwardation, Here's What It Means for Traders
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IntoTheBlock analytics company has tweeted that Bitcoin futures contracts for December are going at a lower price than the BTC spot trading price.

Even though it indicates large selling activity by traders, there is still an arbitrage opportunity, the tweet says.

Bitcoin futures in backwardation

In a short tweet thread, IntoTheBlock's experts explain that the situation with Bitcoin futures mentioned above is called backwardation, and it shows that in the past two weeks, traders have been dumping BTC heavily for fear of lower price movement.

However, as per another tweet, this backwardation provides an arbitrage possibility of buying the futures contract and selling the spot. This way, IntoTheBlock says, traders could profit from the difference here.

U.Today reminds readers that trading cryptocurrencies can be extremely risky, and losing money on this is possible, especially for traders who lack experience in this market.

Related

Has Bitcoin reached the bottom?

IntoTheBlock stated that when futures contracts go into backwardation, this usually matches the times when markets hit bottom. The same thing happened with Bitcoin back in the spring of 2021 and 2020.

Highly negative rates could also be a sign of Bitcoin bottoming out, therefore, IntoTheBlock wonders if the flagship crypto has finally reached the bottom in this bear market.

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