For Crypto Traders, A Signal to Watch and a New Way to Trade
By Payal Shah
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What Determines the Basis?

The value of the spread, or basis, depends on the futures implied financing rate, the time left to contract maturity, and perceived volatility among other factors.

BTIC orders and transactions have their own unique tickers, providing market participants price discovery and transparency on the spread, or difference, between the price of the futures contract and the underlying index throughout the trading day.

BTIC is available for Bitcoin futures (BTC), Micro Bitcoin futures (MBT) and Ether futures (ETH). The BTIC order book is open 23-hours-a-day, allowing real-time price discovery in the futures basis as market participants around the globe submit orders against the respective cryptocurrency reference rate. Additionally, eligible contract participants may execute BTIC block trades 24/7 and submit for clearing during the appropriate clearing window. Whether trading on-screen or bilaterally, a wide range of market participants may use and benefit from the BTIC mechanism. 

Turning Points

The Bitcoin futures basis, when watched carefully, can give market participants an indication of potential turning points in the market. Extreme contango could indicate bullish exuberance and may show the market is nearing a top. Backwardation, on the other hand, could indicate bearish sentiment and may signal potential buying opportunities. Keeping an eye on the basis can be very helpful when trading bitcoin and ether futures.


About the author

Payal Shah
Payal Shah

is Director of Equity Research and Product Development at CME Group. She is based in London.

 

 

OpenMarkets is an online magazine and blog focused on global markets and economic trends. It combines feature articles, news briefs and videos with contributions from leaders in business, finance and economics in an interactive forum designed to foster conversation around the issues and ideas shaping our industry.

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