Bitcoin Price Crash to $50K Dashes Carry Traders’ Hopes

Bitcoin, the most valuable cryptocurrency, has dropped approximately 18% to $50,000 within a day, reaching its lowest point since February 2024. This drop is due to a widespread cautious attitude in global markets, which seems to be driven by a significant increase in the Japanese yen’s popularity as a safe haven and unusual activities in the U.S. bond market.

As an analyst, I’ve noticed a significant trend: The annualized three-month futures premium on Binance, one of the leading crypto exchanges, has dropped to 3.32%. This is the lowest it’s been since April 2023, signaling a potential shift in market sentiment. Interestingly, I’m seeing a similar slide in futures premiums for other major platforms like OKX and Deribit.

Currently, futures traded on the Chicago Mercantile Exchange – often favored by institutions – are generally aligned with the current market prices (spot prices).

Translating this financial term into simpler language: The profit from the traditional cash-and-carry method, which includes holding assets in the current market (or U.S.-listed ETFs) and simultaneously selling future contracts, is currently lower or equal to the interest earned on a 10-year U.S. Treasury bond.

In the initial three months, this approach gained wide acceptance among financial establishments as they invested significantly in futures that were trading at a higher price than 20%. This strategy was believed to have contributed substantially to the volume of investments channeled into the ETFs dealing with the spot market.