Bitcoin basis trading has been booming lately, with the base trading premium doubling in October. This type of trade involves taking opposite positions in the spot and futures markets, and it is typically favored by hedge funds and asset managers. According to BTC analyst James Van Straten, the rise in BTC base trading may be related to the ongoing rate cut by the US central bank, the Fed.
Lower interest rates make BTC base trading a more appealing option with higher returns compared to traditional options. Despite the recent increase in premiums, experts do not believe there is an overheated atmosphere yet, as current spot volumes are half of the March/April volume, indicating less panic buying by small investors.
The number of all BTC open derivatives (OI) has reached an all-time high of $43 billion, with CME futures accounting for $12.69 billion. Hedge funds are driving the increasing basis trading premium, but a sudden drop in the premium could signal a bear market and potential decline in BTC.
