Bitcoin Basis Trade Is 'Back On': What You Need To Know

The Bitcoin BTC/USD basis trade, or “the closest thing to a risk-free bet in cryptocurrency,” is back, on according to a Monday report from Bloomberg.

What Happened: The price of Bitcoin futures has soared this week as market participants anticipate the launch of the first Bitcoin futures exchange-traded fund.

This has led to a scenario where the spread between the spot price of Bitcoin and BTC futures is the widest it has been in five months.

“That means the so-called basis trade, whereby a speculator buys Bitcoin in the spot market and sells long-dated futures to lock in the discrepancy between the two prices, has turned back on,” according to Bloomberg. 

Steve Sosnick, chief strategist at Interactive Brokers Group Inc IBKR, said that as of now, a lot of traders might be betting that a futures-based ETF will be a big forced buyer in the market.

As such, the money that ends up flowing into the product will have to be employed to buy futures contracts.

Meanwhile, open interest on Bitcoin futures hit a record high of $3.6 billion on the Chicago Mercantile Exchange (CME) — the largest Bitcoin derivatives exchange for institutional investors.

According to data from Bybt, the CME accounts for 16% of all BTC futures open interest. CME is surpassed only by Binance and FTX that account for 24% and 17% of the $23 million in BTC futures open interest.

Price Action: Bitcoin was trading at $63,361 Tuesday afternoon, gaining 2.27% over 24 hours.

Photo: André François McKenzie on Unsplash.