Last week, it was observed that the price gap between the upcoming month and the following month’s futures contracts for the largest cryptocurrency Bitcoin (BTC) and the altcoin king Ethereum (ETH) reached the highest level since 2021. This situation, known as contango, indicates that the market is in a bullish trend.
A rare signal appeared in the BTC and ETH futures market at the Chicago Mercantile Exchange (CME). This signal indicates that investors tend to take long positions in leading cryptocurrencies. Futures contracts are agreements to buy and sell the underlying asset at a predetermined price on a specific future date. In the futures markets, contango occurs when the prices of futures contracts for later dates are higher than those for nearer dates.
According to data followed by K33 Research, the futures prices for BTC and ETH have recently faced a similar situation. The futures contracts for the next month traded at a significant positive premium compared to the contracts for the following month. This situation has rarely been seen since 2018.
The respective futures contracts at CME are 5 BTC and 50 ETH in size. As of the time of writing, the contracts expiring in December are referred to as the front month contracts, while those expiring in January are referred to as the next month contracts.
The weekly spread between the front month and the next month BTC and ETH futures contracts rose to 1.5% on an annual basis, marking the first time such a situation has occurred since the early days of the 2021 bull market. This pattern has been seen only four times so far; three during bull markets and one a few weeks before the coronavirus-induced crash in March 2020. Although contango narrowed on Monday, it continues to indicate an upward trend.