The profitability of bitcoin futures declines from 10% to 6%, which prompts traders to look for better chances in the market.
Analysts forecast a correction in the price of bitcoin, arguing that a new price range may pique interest and influence trade.
Renowned analyst Checkmate observes declining profits in deals involving Bitcoin futures, indicating a possible change in the market.
Selling pressure on the Bitcoin (BTC) market has been building. As a result, there is likewise less energy in the futures market. There isn’t much profit left for traders to squeeze out of the Bitcoin futures cash-and-carry trade because of its falling profitability.
The decrease in Cash-and-Carry Bitcoin Transactions
Trades involving cash and carry are common in the derivatives market. Using this method, the asset is purchased on the spot market and concurrently sold on the futures market. In cash-and-carry transactions, Bitcoin futures traders could lock in an almost risk-free annualized premium of 10% just a few weeks ago. This premium was the annualized difference between the spot price of bitcoin and the bitcoin futures.
However, traders need capital to hold Bitcoin and margin alongside the futures contracts, effectively reducing the returns to 5%. Interestingly, this annualized premium has now dropped to 6%, or technically 3% considering the margin costs for holding in the spot markets. If the annualized returns for the Bitcoin cash-and-carry trade fall under the risk-free return, the trade becomes less attractive.
Market Sentiment and Future Price Movement
Popular crypto analyst Checkmate notes that the profitability in Bitcoin futures trades is no longer attractive. He stated, “There’s no juice left to squeeze.” Thus, Bitcoin traders might start seeking other alternatives. Trading Bitcoin futures cash-and-carry is now more risky than rewarding.
The #Bitcoin futures cash-and-carry trade is very likely reaching the end of the juice left to squeeze.A few weeks ago, traders could lock in an almost risk-free 10% annualised premium by being long spot, short futures. Technically this is ~5% as you need capital on both sides.… https://t.co/2TirvMW07t pic.twitter.com/sj1jTUBgST
— _Checkmate (@_Checkmatey_) June 24, 2024
Also, since Bitcoin’s price has dropped over 12% from its June highs, experts believe it will soon hit around $60,000. Bitcoin analyst Checkmate stated that the BTC sell-side risk ratio has reached levels suggesting a major shift is imminent. “All the profits that were going to be taken, have been. Same for losses,” he explained.
Checkmate added that the Bitcoin market would establish a new price range, igniting emotions such as fear, greed, panic, or euphoria. These emotions will drive the next phase of the market movement. As traders adjust to these new conditions, the market dynamics will shift, potentially leading to new trading strategies and opportunities.
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