What Market Conditions Might Cause a Cryptocurrency to Enter Backwardation?

Backwardation in cryptocurrency markets occurs when the futures price is lower than the current spot price. This can be caused by strong immediate demand for the asset, leading to higher spot prices.

It can also be driven by bearish sentiment due to factors like anticipated regulatory actions, negative network upgrades, or broader macroeconomic concerns that suggest future price decreases. This condition is often associated with market stress, "extreme fear," or heavy hedging activity.