I’m not confident we hit a true capitulation in bitcoin, derivatives expert says. Bitcoin’s futures market doesn’t show panic capitulation as in late 2022, analyst said. Bitcoin briefly fell to about $60,000 before rebounding near $69,000, but derivatives data suggest the market has not yet seen a true capitulation bottom.
Futures on bitcoin are still trading at a modest premium of around 4% to spot prices, rather than the steep discounts seen in prior bear markets. At the end of the 2022 bear market, 90-day bitcoin futures traded at a 9% discount to spot. About a week ago, bitcoin dropped more than 10% in a day to around $60,000 before rebounding to $70,000 in recent days. The question is whether the slide marked capitulation, when holders panic-sell at a loss, exhausting bearish pressure and setting the stage for a new bull run.
The futures market says no, suggesting there’s scope for another leg lower, according to Amberdata’s director of derivatives, Greg Magadini. The lack of ‘reaction’ in the futures basis doesn’t make me confident we hit a true capitulation moment, Magadini said in a market note Monday. Magadini is referring to how futures typically trade in relation to the spot price during bearish trends and capitulation phases. Futures are standardized derivative contracts to buy or sell an underlying asset, like bitcoin, at a set price on a future date.
Traders use futures to bet on price direction, buying contracts when they expect a rally or shorting when they anticipate a decline, without actually owning the asset itself. The price difference, or basis, between futures and spot markets reveals market sentiment and trader positioning. When futures trade at a significant premium to spot prices, it signals bullish optimism among investors. Conversely, a discount indicates bearish pressure.
Historically, bitcoin bear markets have tended to bottom out, with standard futures and perpetual futures trading at significant discounts to spot on major exchanges. These massive discounts represented capitulation and mark the final bear-market flush. Last week, however, futures slipped into a discount only for a short time. Although the 90-day basis dropped lower on each leg down for BTC, these moves barely ranged -100bps.
Today, fixed basis remains around 4% for BTC (inline with risk-free treasury yields), Magadini said. Compare that with the end of the 2022 bear market, when the 90-day futures traded at a 9% discount as the bitcoin price bottomed out below 20,000. So, if history is a guide, bitcoin could see another leg lower where futures traders capitulate, pushing prices into a steep discount relative to the spot price. Bitcoin recently changed hands near $69,000, a 1% drop since midnight UTC.
Bitcoin briefly dipped to about $60,000 before rebounding toward $69,000, while derivatives data indicate the capitulation bottom has not appeared. Futures remain at roughly a 4% premium to spot, unlike the steep discounts seen at bear-market bottoms. Amberdata’s Greg Magadini notes this setup suggests there could be another leg lower before any fresh rally. Historically, large discounts to spot in 90-day futures sign capitulation and the end of a bear market; today, such a reaction is lacking.
The lack of a strong basis move implies bearish pressure has not yet been exhausted, according to Magadini in a market note. Bitcoin trades near $69,000, with recent volatility reminding traders that another slide could occur if history repeats. If conditions unfold, futures traders may capitulate and push prices into a deeper discount relative to the spot price, as the market prices in risk-free yields around 4% for BTC.
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