What Does Persistent Backwardation Typically Signal about the Institutional Demand for Bitcoin?
Persistent Backwardation, where the futures price is consistently lower than the spot price, often signals a strong institutional demand for immediate spot Bitcoin. It can also suggest that institutions are heavily shorting the futures market to hedge large spot holdings or anticipate a significant near-term price drop.
It is a less common condition than Contango and can indicate a scarcity of spot liquidity or strong bearish sentiment.
Glossar
Institutional Demand
Demand ⎊ Institutional demand, within cryptocurrency derivatives and options trading, signifies the purchasing pressure exerted by entities beyond retail investors ⎊ typically encompassing asset managers, hedge funds, family offices, and sovereign wealth funds.
Persistent Backwardation
Definition ⎊ Persistent backwardation describes a market condition where the price of a futures contract consistently trades below the current spot price of the underlying asset.
Demand
Momentum ⎊ The observable inclination for an asset or derivative to persist in its prevailing price trend, demand within cryptocurrency markets, particularly for options and futures, reflects this inertia.