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Bitcoin: What to expect from CME’s Term Spread spike

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Dealing with market volatility is common in the case of Bitcoin and the current narrative is heading in a similar direction. While the market is still in a considerably bullish bracket, the likelihood of a reversal keeps floating about in the space.

Now, according to recent data, a major change may be afoot, one that might kick-start another period of correction for the world’s largest digital asset.

Rise of CME Term SpreadĀ 

Source: Bitcoinuncharted

According to bitcoinuncharted, the CME term spread for Bitcoin spiked rapidly over the last week. The basis spread is defined as the difference between the cryptocurrency’s near-future price and spot price. The aforementioned surge took place when Bitcoin took off to $38k from $31k in an hour.

The change could have been momentary, but the impact might now lead to a period of prolonged backwardation. Backwardation is a state where the Future price is expected to be lower than the current trading price.

Source: Bitcoinuncharted

The ongoing cooling-off period in the Futures market can be identified by the fact that fewer traders are opting for leverage trades at the moment. The Bitcoin future to spot volume ratio has also dropped dramatically, suggestive of the fact that traders are more comfortable with spot exposure, rather than perpetual contracts.

What remains bullish for Bitcoin?

Source: Bitcoinuncharted

One positive metric for Bitcoin remains the declining funding rate. According to the attached chart, the funding rate is now down to a multi-month low, a finding that provides a strong foundational base for Bitcoin to build upon.

In the past, strong bullish legs have emerged from a low funding rate state. Hence, the likelihood of the market picking up bullish pace in the near-term remains.

Additionally, the Bitcoin Fundamental Index (BFI) had strongly positioned itself in a bullish regime, with the same holding its position since January 2021.

Beginning of a short irresolution period?

With the possibility of strong corrections continuing to rise, certainty in the market can be best characterized as evasive. The un-correlation between Bitcoin and other digital assets has never been higher than in 2021, something that opens the door to individual spikes or dumps. Right now, traders are continuing to throw darts in the dark, unsure of where they may land in the immediate future.


Biraajmaan covers market trends of major cryptocurrencies. As a graduate in engineering, his interests lie in Blockchain technology. With over a year as a journalist, his articles focus on US and UK markets.
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