March 2020 would be a month to forget for the global financial industry. With the traditional markets registering some of their worst declines since the late 1980s, major stocks such as Dow Jones and S&P 500 were still trying to recover some of their losses.
The digital asset industry has been the same as Bitcoin lost over 38 percent of its valuation on 13th March. However, the crypto markets have witnessed a faster recovery rate in comparison to traditional stocks and Bitcoins’ derivatives market is one of the prime examples.
Now, According to a recent Arcane Research, it was observed that Bitcoin Futures over the past week have started trading at positive premiums again. It was a major improvement in terms of market sentiment as, during the 3rd week of March, the premium on both institutional and retail exchanges were exhibiting a negative rate.
There was another key difference response observed in the charts.
The reports suggested that at the time of writing, CME BTC futures contracts were trading at a higher annualized premium of 7.39 percent whereas the collective retail exchanges such as BitMEX, Deribit only registered a lowly premium of 0.19 percent.
The above data is crucial because it highlighted the fact that institutional investors were more bullish in the market than retail but the scenario was completely divergent during the early-year bullish run.
During January-February 2020, the retail exchanges had an upper hand in terms of higher premium rates and many speculated that these exchanges were majorly responsible for Bitcoins’ early year rally.
In spite of CME’s current positive outlook, it is not surprising that institutional exchanges were doing better than retail platforms.
During the crash on 13th March, the open-interest and 24-hour trading volume on BitMEX, OKEx, Huobi, and Deribit exhibited a massive drop with pushed the entire market towards a panic sell-off. The number of put sales order went above the usual margin as people contemplated the prices to fall further.
However, a similar sentiment did not precipitate on the institutional end.
Although a drop in OI was observed on CME as well, the drop in these institutional exchanges was not as dramatic in comparison to retail.
Bakkt’s BTC futures contracts accommodated a similar situation as after a minor dip in trading volume after the crash, the total trading volume jumped backed to normal levels over the same week.
Hence, it can be implied that licensed investors on Bitcoin were keeping their fate on the future of Bitcoin’s valuation and were unnerved after the collapse in March.
Backwardation may lead to another pullback?
However, in spite of the positive sentiment on CME and Bakkt, a phase of backwardation was currently evident in Bitcoin’s market which suggested that many expected Bitcoin’s price to fall further in the charts. Therefore, a lot of people were holding off their investment and waiting for the current prices to drop below the spot prices.
Such a scenario may have major implications in the future since any move upwards with low Bitcoin trading volume with lead to the formation of a weak bottom.
Bitcoin would be highly vulnerable to another pullback. Therefore, a breakaway from backwardation is still crucial for a possible bull run ahead.
