What Market Conditions Typically Lead to a State of Backwardation in Crypto Futures? ▴ Learn

What Market Conditions Typically Lead to a State of Backwardation in Crypto Futures?

Backwardation (futures price < spot price) typically occurs when there is a strong immediate demand for the underlying spot asset, leading to a premium on the spot price. This can be due to a perceived short-term supply shortage, a sudden positive market event, or a strong desire to acquire the asset for immediate utility (e.g. staking, governance).

It suggests that market participants expect the spot price to decline in the future.

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