How Does the Futures Curve for Cryptocurrencies Differ from That of Traditional Commodities?

The futures curve for cryptocurrencies differs from traditional commodities in a few key ways. Cryptocurrencies have negligible storage costs compared to physical commodities like oil or grain, so the cost of carry is less of a factor in their futures pricing.

Instead, sentiment and speculative expectations play a much larger role in shaping the crypto futures curve. Additionally, the concept of "convenience yield," which is the benefit of holding a physical commodity, does not directly apply to cryptocurrencies.

Finally, crypto futures markets are often dominated by retail speculation to a greater degree than traditional commodity markets, which can lead to more extreme contango and backwardation.