Bitcoin CME futures are trading at a $300+ premium; Here’s what this means

6 August 2020

in Bitcoin

Reading Time: 3 mins read

Bitcoin’s recent strength has created a sense of “FOMO” amongst investors. This trend is elucidated while looking towards the growing premium between spot Bitcoin and BTC futures on the CME.

Demand for BTC from investors using this platform – which is tailored towards institutions, professional traders, and wealthy retail traders – has driven the futures premium up over $300 above what spot Bitcoin is currently trading.

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This is a sign that so-called “smart money” is frantically moving to add upside exposure to Bitcoin.

[crypto-donation-box]

Despite this trend, the Commitment of Traders report from last week shows that institutions using the CME to trade the benchmark cryptocurrency remain net-short.

Bitcoin’s strength grows as demand for scarce assets reaches a boiling point

As the money printers within central banks across the globe continue printing fiat at unprecedented rates, investors are growing increasingly fearful of the imminent inflation that will ultimately result from this.

As such, they have been turning to assets with scarcity to help protect and preserve their capital.

This has caused gold’s price to reach a fresh all-time high of over $2,000 per ounce today, while silver and other commodities also show signs of strength.

The same factors driving gold’s price higher are also boosting Bitcoin, allowing it to climb from lows of $9,000 just a few weeks ago to recent highs of $12,000.

CME futures see rising premiums as demand for BTC grows

One sign of growing Bitcoin demand is the premium seen while looking towards BTC futures on the CME.

Analyst Josh Rager recently observed that futures for the benchmark cryptocurrency on the platform are now trading at an over $300 premium versus spot BTC.

“CME BTC futures trading $300+ over spot at $11,945+ Would love to see spot Bitcoin price continue to move up too and close higher-high over $11,827 for the daily.”

Image Courtesy of Josh Rager. Chart via TradingView.

This does suggest that traders are in a frenzy to gain BTC long-exposure due to its ongoing strength, but institutions remain somewhat skeptical.

According to last week’s Commitments of Traders report, institutional investors are heavily net-short despite retail traders being overwhelmingly long.

Data aggregator Unfolded recently offered insight into this trend:

“28 – July CME BTC Commitments of Traders Report (COT). Open Interest: 13,068 (up 41.5%). Retail net positions hits all-time-high. The smart money (institutions) remains flat net short.”

Image Courtesy of Unfolded. Chart via TradingView

As Bitcoin grows increasingly correlated to gold, we may start seeing institutional traders remove some of their short exposure to the benchmark crypto.

Bitcoin, currently ranked #1 by market cap, is up 3.93% over the past 24 hours. BTC has a market cap of $215.63B with a 24 hour volume of $23.14B.