Movement in futures contracts may indicate a sign of new lows

One of the many signs to look for when determining possible future Bitcoin moves is precisely the futures market, which is directly related to how different investors, especially institutional ones, are. Recent moves in the Bitcoin futures market indicate that there may be no light at the end of the tunnel yet.

The Bitcoin futures market is entering a period that the “deterioration”. This is a common phenomenon in the futures market, but it is still something that catches the eye.

It is a moment that symbolizes a situation where futures contracts that expire or settle many months later are priced lower than contracts that expire in the following month. Usually, this type of move means that value may lose momentum over the medium and long term, which is not good for the current market moment.

According to the website, this condition does not exist in the Bitcoin futures market for a long time, since May 2019. What is rare is the “prolonged” episode of backwardation, as noted by Luno Research, the condition appeared for short periods, including in May 2021 for a few days, but did not last that long.

Bearish Signal for Bitcoin Futures

According to the researchers at Luno Research, this kind of move generally shows that there is not such a bright future for Bitcoin. They explain that a steeper futures curve, i.e. a high value in the coming months relative to the next month’s expiration, indicates bullish sentiment.

However, what we see in the Bitcoin futures market is the opposite effect.

“A flat futures curve or a downtrend curve implies the opposite – those in long positions demand compensation for the risk of exposure to more dated and less liquid BTC contracts,” he explained.

With that, it looks like this sideways (sometimes bearish) move that has been sustained in Bitcoin over the past year will continue to catch up with investors. Laurent Kssis, Cryptomarket analyst at CEC Capital said the constant selling pressure is not helping to change that pattern for the foreseeable future.

“Since a push for a rally and other good news in cryptocurrencies is unlikely for next year, the best strategy is the spread calendar i.e. sell sets and buy calling“, he said.

For hodlers, it remains to wait for the tide to turn at a more favorable time.

Source: Live Coins

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