What’s Driving the Spike?
Bitcoin futures are seeing a big jump in short interest, but it’s not all bad news. Experts say it’s mainly due to a popular trading strategy called the “basis trade.”
The Basis Trade Strategy
The basis trade takes advantage of differences between the spot price and futures price of Bitcoin. With the launch of spot Bitcoin ETFs, it’s become easier for traders to buy ETFs and sell futures at higher prices, making a profit on the price gap.
Rising Short Interest, Rebounding ETF Demand
While short interest in futures is up, demand for spot Bitcoin ETFs has also increased. However, analysts say the basis trade isn’t the only reason for the ETF inflows. Organic demand is also playing a role.
Market Dynamics
The basis, the difference between spot and futures prices, has been hovering around 6% recently. Despite the popularity of the basis trade, short-term ETF flow data can be misleading.
Current Market Situation
As of writing, Bitcoin is trading at $66,270, down 5% in the past 24 hours. The downtrend may continue, with support at $66,300 before a potential retest of $65,000.
