Define ‘Contango’ and ‘Backwardation’ in the Context of Bitcoin Futures Markets

Contango occurs when the price of a Bitcoin futures contract is higher than the current spot price, indicating that market participants expect the price to rise or are factoring in the cost of carry. Backwardation is the opposite, where the futures price is lower than the spot price, often suggesting bearish sentiment or an expectation of a near-term supply shock.

These conditions reflect market expectations and influence hedging decisions.