Bitcoin Futures Annualized Premium Climbs Sharply, Sign Of Strong Institutional Interest?

As the crypto market maintains its bullish strength, many key metrics of Bitcoin have been demonstrating strong and optimistic trends in recent weeks, which could impact prices positively, suggesting a promising outlook for BTC in the upcoming days.

A Strong Growth In Bitcoin Futures Premium

Bitcoin‘s futures annualized premium, a crucial metric that often gives bullish signals, has witnessed significant growth in the past few weeks. Crypto enthusiast and analyst, James Van Straten, shared the positive development on the X (formerly Twitter) platform, capturing the crypto community’s attention.

It is worth noting that the increase in this crucial indicator comes in light of rising market trends, indicating a shift in sentiment and a rise in investors’ confidence in future price performance both in the short and long term. Also, a growing demand with traders expecting further increases is often indicated by this spike in the indicator.

According to the expert, in the past 1 month, the annualized premium for purchasing spot Bitcoin Exchange-Traded Funds (ETFs) and selling short Chicago Mercantile Exchange (CME) futures has nearly doubled in growth, rising from about 6% to 11%.

James Van Straten further claims that the increase is more than twice the current Federal Reserve (Fed) funds effective rate of 5%, in addition to the Fed cutting rates even more over the next 3 months. “I would assume the use of the “basis trade” will only increase,” he added.

The analyst also pointed out a rise in Bitcoin’s Futures’ Open Interest (OI) while expressing his confliction when it comes to whether the “basis trade” is being used more or less. 

In the last 24 hours, Bitcoin’s futures open interest saw a sharp increase of 20,000 BTC. Van Straten noted that the growth marks the biggest spike in open interest since June of this year along with a surge in net non-commercial short positioning.

However, while Bitcoin spot ETFs inflows totaling $2.7 billion and the recent acquisition from Emory University in the United States supports a pick-up directional long bias by about $15 million, CME open interest has declined more than 6% since its all-time high in mid-October. In any case, Van Straten claims directional long positioning simply increases liquidity, if not now, it will be later.

BTC Poised To Retest Its All-Time High Shortly

Optimism is brewing in the market as Bitcoin continues to see promising upward movement as it approaches its all-time high price of $73,000 set in March. Given the strong investors’ sentiment toward the crypto asset, there is a possibility that BTC could hit this crucial level in a few days.

At the time of writing, Bitcoin was trading at $72,412 only inches away from its peak, indicating a nearly 2% surge in the past day. Several upcoming key events like the US Presidential election are believed to drive the price even higher, which could see BTC setting a new peak soon.

Featured image from Unsplash, chart from Tradingview.com