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Demystifying Future Bitcoin Trading

Bitcoin is still a young and feeble market, as evidenced by its many peculiarities. For example, contracts for bitcoin futures on the Chicago Board Options Exchange (CBOE) have been trading in backwardation, which means contracts with a later expiration are trading consecutively lower. This is not a bearish indicator for prices, however, analysts explain.

BTC Futures in Backwardation

When CBOE launched CBOE BTC (XBT) futures on Dec. 17, 2017, many investors were excited believing this launch validated Bitcoin as an asset class. In early 2018, the bitcoin futures curve started out in contango, but fast forward to early 2019 we have seen contracts for bitcoin futures on CBOE briefly enter backwardation. 

Mati Greenspan, senior market analyst at eToro, has previously shared his thoughts on CBOE’s bitcoin futures contracts signaling backwardation. He asserts that this trend does not represent a lack of confidence in the future price, with Greenspan highlighting that oil futures were trading in contango – the opposite of backwardation – before prices collapsed back in October 2018.

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