Bitcoin futures on CME surpass those on Binance to trade at the widest premium since November 2021
Yes, you read the headline correctly. Bitcoin (BTC) futures are unusually trading at a higher premium on the Chicago Mercantile Exchange (CME) than on Binance.
Three-month bitcoin futures listed on the CME, considered a proxy for institutional activity, trade at an annual premium of about 8.7% to the underlying benchmark. The corresponding premium on offshore exchanges, mainly Binance, has jumped to 6.3%, the highest since January 2022.
On the CME, the premium is the highest positive basis since November 2021, according to data tracked by Arcane Research. At the time, bitcoin was trading at record highs near $69,000 — nearly three times today’s $24,850, CoinDesk data shows. (We’re talking about premiums in the standard futures market here, not perpetuals, which are futures-like derivatives with no expiration.)
Bitcoin is up more than 45% so far this year, outperforming traditional risk assets, including Wall Street’s tech-heavy Nasdaq index, by a significant margin. Futures typically trade at a premium in a sign that leverage is skewed to the positive side when the underlying asset rises in value. Conversely, during bear markets, discounts are often observed.
“The bull is back,” Arcane research analyst Vetle Lunde told CoinDesk.
Historically, futures on CME have traded at a relatively lower premium than those on Binance and other unregulated offshore entities, largely because these latter opportunities provided higher leverage. That means traders on offshore exchanges were able to take larger bullish bets while putting up a relatively small amount, called a margin.
However, offshore exchanges have cut back on influence since the second half of 2021, and they now account for just 30% of global futures activity, with the rest coming from the CME.
Another reason CME has turned offshore exchanges is that futures-based exchange-traded funds linked to bitcoin only invest in regulated CME futures contracts.
According to Arcane Research, open interest, or the number of open futures contracts on the CME, is currently 80,586 BTC – or 70% of global open interest. That’s significantly higher than the 28% below the height of the April 2021 bull run.
“It’s rare to see CME futures trade on one [higher] premium,” said Lunde. “With that in mind, CME is a big part of BTC futures activity as a whole. The offshore futures market is insignificantly small now, with all activity concentrated for ages.”
Looking ahead, a continued move higher in the premium could see carry traders return to the market. The cash and carry arbitrage involves buying bitcoin in the spot market and simultaneously selling futures contracts in an attempt to pocket the premium. Carry trading was quite popular during the bull run when premiums reached as high as 40% on offshore exchanges.
