The Bitcoin futures market is showing signs that have signaled bullish sentiment in the past. Analysts are paying attention to the Bitcoin futures basis – a metric that represents the difference between the Bitcoin futures price and its spot price.
The latest data revealed that this basis has increased to unprecedented levels since Bitcoin’s all-time high of $69,000 in November 2021.
Bullish indications from Bitcoin futures
Deribit Chief Commercial Officer Luuk Strijers highlighted the current state of underlying Bitcoin futures, which ranges from 18% to 25% annually, a rate that resembles market conditions in 2021.
According to Strijers’ commentary, this increased basis is not just a number, but a lucrative opportunity for derivatives traders.
By engaging in trades involving the purchase of Bitcoin on the spot market and the simultaneous sale of futures contracts at a premium, investors can hedge a “dollar profit” that will materialize upon the expiration of the contract, regardless of Bitcoin price volatility.
Strijers further noted that this strategy is particularly attractive in the current climate, driven by an influx of new investments following the approval of Bitcoin ETFs and the expectation of a Bitcoin halving event.
The importance of an increased futures base goes beyond the mechanics of derivatives trading. This further reflects broader market optimism, “enhanced” by recent regulatory approvals and macroeconomic factors impacting the cryptocurrency.
The divergence between Bitcoin spot and futures prices suggests some market prospects, driven by the expectation of continued investment inflows and the impact of the upcoming Bitcoin halving.
Such conditions create fertile ground for Bitcoin’s value to rise, as historical precedent has often linked bullish futures base rates to periods of significant price increases.
Market sentiment and halving cycles
Although Bitcoin’s current market performance has been bearish, with a decline of 3.9% bringing its price to $68,203, market analysts advise against interpreting this as a negative signal. Rekt Capital, a respected figure in cryptocurrency analysis, views the recent price correction as a “positive correction” ahead of the long-awaited Bitcoin halving in April.
Halving events, which reduce the block reward for miners, thereby slowing the rate of new Bitcoins entering circulation, traditionally catalyze significant price increases due to the resulting supply constraints.
Rekt Capital’s analysis aligns with current market movements and historical patterns observed in previous halving cycles.
According to the analyst, despite the rapid pace of these cycles, they show a consistent sequence of pre-halving rallies followed by a pullback phase – both consistent with Bitcoin’s current trajectory. This cyclical perspective suggests that the recent decline is only a temporary setback, setting the stage for another post-halving phase of growth.
While there are signs that BTC is experiencing an accelerated cycle…
Yet history keeps repeating itself$BTC The “pre-halving rally” began as planned.
And now, #Bitcoin enters “Retrace Pre-Halving Retrace” mode as scheduled#Crypto https://t.co/Egqxs9ritl pic.twitter.com/lj0IdQtBEE
— Rekt Capital (@rektcapital) March 15, 2024
Featured image from Unsplash, chart from TradingView
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