Bitcoin Futures Premium Drops 4% Amid Institutional Demand

Bitcoin futures premium has fallen to a three-month low, despite the price of Bitcoin (BTC) being just 8% below its all-time high of $103,300. This drop in the futures premium is unusual, given the strong institutional demand for Bitcoin, as evidenced by the $5.14 billion in net inflows into US-listed Bitcoin spot exchange-traded funds (ETFs) over the 30 days ending June 18. Additionally, several firms, including Strategy, Metaplanet, H100 Group, and The Blockchain Group, acquired significant quantities of BTC during this period.

The weakness in Bitcoin derivatives may be attributed to a specific factor within the industry, or it could be simply related to fear over the troubled socio-economic environment. Under neutral conditions, monthly Bitcoin futures typically trade 5% to 15% above spot markets to compensate for the longer settlement period. However, this indicator has remained below the neutral threshold since June 12, following a rejection at the $110,000 level. The futures premium slipped below 4% on Thursday, marking the lowest level in three months. More surprisingly, the BTC futures metric is now lower than levels recorded in early April, when Bitcoin dropped 10% in 24 hours to $74,440.

To confirm whether the pessimism is limited to monthly futures contracts, one should assess Bitcoin options markets. When traders fear a price crash, put (sell) options gain a premium, pushing the skew metric above 5%. Conversely, during bullish periods, the indicator tends to move below -5%. The Bitcoin options skew is currently at 5%, right at the edge of neutral to bearish sentiment. This stands in stark contrast to June 9, when the indicator briefly touched a bullish -5% level after Bitcoin jumped from $105,500 to $110,500. The shift highlights how traders are increasingly disappointed with Bitcoin’s recent performance.

The Russell 2000 US small-cap index held the 2,100 support level, even as tensions in the Middle East weighed on investor sentiment. Recession risks also increased, with interest rates remaining above 4.25% in the United States amid persistent inflationary pressure. This macroeconomic pressure may be contributing to the bearish sentiment in the Bitcoin derivatives market, despite the strong institutional demand for Bitcoin.

Cryptocurrency traders are known for emotional swings, often selling in panic during uncertainty or showing excessive optimism in bull markets. The current weakness in Bitcoin derivatives suggests traders are not confident that the $100,000 support will hold. It remains uncertain what might restore confidence among Bitcoin traders. However, the longer BTC price stays near the $100,000 psychological level, the more confident the bears will become.