Bitcoin CME Futures Premium Hits Lowest Level Since October 2023, Signaling Reduced Institutional Demand

The premium on Bitcoin (BTC) futures traded on the Chicago Mercantile Exchange (CME) has narrowed sharply, pointing to waning interest from institutional investors, according to research firm 10x Research.

The annualized premium on rolling three-month CME futures has dropped to 4.3%, the lowest level since October 2023. This marks a significant decline from earlier this year when the premium exceeded 10%.

Despite Bitcoin’s price maintaining above the $100,000 mark, the shrinking futures premium—often referred to as the basis—suggests diminished optimism or growing uncertainty about future price trends.

This downward trend aligns with recent shifts in funding rates for perpetual futures on major offshore exchanges. Funding rates have recently turned negative, indicating that perpetual futures are trading at a discount to the spot price, which typically signals a bias toward bearish short positions.

The narrowing premium poses challenges for traders engaging in non-directional cash-and-carry arbitrage, a strategy that involves buying Bitcoin or Bitcoin ETFs on the spot market while shorting CME futures simultaneously.

Markus Thielen, founder of 10x Research, explained to CoinDesk, “When yield spreads fall below a 10% threshold, Bitcoin ETF inflows tend to be driven more by directional investors than by arbitrage-focused hedge funds. This pattern usually coincides with price consolidation. Currently, these spreads are down to 1.0% for perpetual futures funding rates and 4.3% for CME basis rates, highlighting a sharp decline in hedge fund arbitrage activity.”

Thielen also noted that this decline corresponds with subdued retail trading activity, as reflected by lower perpetual funding rates and muted spot market volumes.

Echoing this view, Padalan Capital stated in a weekly market update that the falling funding rates reflect a pullback in speculative interest.

Padalan Capital added, “A clearer indicator of risk-off sentiment comes from regulated venues where the CME-to-spot basis for both Bitcoin and Ethereum has inverted sharply into negative territory. This suggests aggressive institutional hedging or a significant unwind of cash-and-carry trades.”