CME Bitcoin Futures Analysis: Unusual $1.6K Premium Indicates a Promising Start for 2024
2024 kicked off on a strong note for the futures market, with the Chicago Mercantile Exchange (CME) Bitcoin (BTC) futures trading at $47,040 on January 2. What made this move particularly interesting was that it surpassed the spot price. Market analysts are now delving into the reasons behind this price surge and whether it holds any significance for future price movements. Some have suggested that it could be linked to the market’s anticipation of the potential approval of a spot Bitcoin Exchange-Traded Fund (ETF). Bloomberg senior analyst James Seyffart recently stated that there is a 90 percent probability of ETF approval by January 10.
To make sense of this market behavior, analysts have pointed out that a healthy market typically sees monthly futures contracts trading between 5 percent to 10 percent above the basis rate to account for longer settlement times. However, looking at the CME’s Bitcoin futures from January 2023 to November 2023, there was a minimal premium relative to the BTC spot market, with an annual increase of just 14 percent, barely exceeding $350.
The situation drastically changed on November 24, 2023, when the CME Bitcoin futures premium surged to $900, the highest level recorded in over two years. This spike followed a 41 percent increase in the Bitcoin price to $37,750 40 days prior. However, by December 6, 2023, the futures premium had dropped by $530, coinciding with Bitcoin’s rise to $43,800.
Interestingly, this premium surge appears to be limited to CME, as other major crypto exchanges such as Binance, Bybit, OKX, and Deribit reported an annualized 32 percent BTC futures premium on December 2, 2023, which was still the highest in two years. Analysts attribute this discrepancy to variations in client profiles, with CME requiring a margin of 40 percent to 50 percent, while crypto exchanges offer up to 100x leverage.
The BTC options market has remained neutral in terms of pricing put and call options since December 6, 2023. As of the time of writing, Bitcoin is trading at $43,113.43, having surged 57 percent in the last three months and adding $15,795.33 to its previous price. However, it currently has a bearish sentiment with a score of 32/100 and has declined by 3.71 percent in the past 24 hours.
Despite the recent volatility, a price prediction platform suggests that Bitcoin could reach as high as $120,717.60 before the end of the year. Only time will tell if the CME Bitcoin futures premium and the potential ETF approval will have a significant impact on the cryptocurrency’s future price movements.