The Bitcoin futures market is experiencing a notable decline in profitability, impacting traders and signaling caution ahead. As Bitcoin and the broader crypto market face significant selloffs, the landscape for traders is rapidly changing. What are the reasons behind the decline in Bitcoin futures cash-and-carry trade profitability and the broader market implications?
Decline in Bitcoin Futures Cash-and-Carry Trade Profitability
Understanding Cash-and-Carry Trades
Cash-and-carry trades are a popular strategy in the derivatives market where traders buy the asset in the spot market and simultaneously sell it in the futures market. This strategy historically allowed Bitcoin futures traders to lock in nearly risk-free annualized premiums. However, the profitability of this strategy has significantly declined.
Falling Annualized Premiums
Just a few weeks ago, Bitcoin futures traders enjoyed an annualized premium of 10% in cash-and-carry trades. This premium has now plummeted to 6%, and when accounting for margin costs, the effective return is around 3%. As these returns dip below risk-free rates, the attractiveness of Bitcoin futures trades diminishes. Prominent crypto analyst Checkmate noted that the profitability in Bitcoin futures trades has become "end of the juice left to squeeze," indicating traders might shift their focus to other opportunities.
Price Predictions Amid Market Selloff
Bitcoin Price Prediction: Impact of the Cash-and-Carry Decline
The Bitcoin price has corrected more than 12% from its June highs, and analysts speculate a drop to $60,000 is imminent. Checkmate highlighted that the current market conditions could lead to a new price range, driven by market emotions such as fear, greed, panic, and euphoria. Bitcoin is forming a falling wedge in lower time frames, indicating a possible further decline.
Other analysts predict Bitcoin could crash to $50,000 due to a double-top pattern formation and continuous outflows from spot Bitcoin ETFs. The key support level remains at $60,000, but concerns over massive selloffs by less experienced investors ("dumb money") could lower prices.
Ethereum and Altcoins Performance
The broader crypto market is experiencing a significant selloff, with market capitalization dropping from $2.35 trillion to $2.26 trillion in just 24 hours. This has led to a loss of $160 billion in net wealth for crypto investors. The Crypto Market Fear and Greed Index has slid from extreme greed (76) to neutral (51), reflecting the shift in market sentiment.
Like Bitcoin, Ethereum also saw a 4% drop, with its price now at $3,366, marking a monthly decline of over 10%.
Altcoins, including Solana, XRP, Toncoin, Dogecoin, Cardano, and Shiba Inu, have tumbled 3-6% in the past 24 hours. Meme coins and AI coins are particularly affected, with notable selloffs contributing to the market correction. Coinglass data revealed $170 million in liquidations, with $127 million in the last 12 hours alone.
Macro Events Boost Selling Pressure
Key macro events, such as U.S. PCE inflation data, monthly options expiry, ISM manufacturing data, Fed Chair Powell's speech, the FOMC meeting release, and jobs and unemployment rate data, are expected to impact the crypto market. Over 105,000 BTC options, valued at $6.72 billion, are set to expire on June 28, with significant selling pressure likely to persist.
The decline in Bitcoin futures cash-and-carry trade profitability and the broader crypto market selloff highlight a period of caution and adjustment. Traders are advised to closely monitor macroeconomic indicators and market trends to navigate the evolving landscape. Breaching the 60k support level is the first indicator to look out to, in the hope of a correction and not a further dip.
