Selling pressure in the Bitcoin market ( $BTC ) is increasing. This leads to a decline in energy in the futures market. Currently, cash-and-carry transactions of Bitcoin futures contracts are no longer very profitable for traders.
Decline in Bitcoin Cash-and-Carry Transactions
Cash-and-carry trading is a popular method in the futures market. According to this method, users buy assets on the spot market and at the same time sell on the futures market. In this trade, Bitcoin futures traders were able to lock in annualized risk-free profits of 10% just a few weeks ago. This reward is the annual difference between the Bitcoin Spot price and the Bitcoin futures contract.
However, traders need capital to hold Bitcoin and futures contracts, effectively reducing profits to 5%. Interestingly, this additional annual fee has now been reduced to 6%, or technically 3% accounting for the marginal cost of holding in spot markets. If falling annual cash-and-carry returns meet risk-free returns, the trade will be less attractive.
Market psychology and future price fluctuations
Popular crypto expert Checkmate noted that profits from Bitcoin futures trading are no longer attractive. Therefore, Bitcoin traders may start looking for other options. Cash-and-carry trading of Bitcoin futures is currently more risky than worth the investment.
Additionally, since Bitcoin price has dropped more than 12% from its peak in June, experts believe it will soon drop to around $60,000. Bitcoin expert Checkmate says the BTC short-risk ratio has reached a level that indicates a major change is approaching.
Checkmate added that the Bitcoin market will establish a new price range, triggering emotions such as fear, greed, panic or exultation. These emotions will drive the next phase of the market movement. As traders adjust to these new conditions, market dynamics will change, possibly leading to new trading strategies and opportunities.
