CME Bitcoin Futures Premium Evaporates

The latest moves in crypto markets, in context

January 14, 2022

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Good morning, and welcome to First Mover. Here's what's happening this morning:

Market Moves: CME Bitcoin Futures Premium Evaporates

And check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time. Today's show will feature guests:

Alexander Holmes, CEO, MoneyGram

Neil Bergquist, CEO and co-founder, Coinme

Brad Roth, chief investment officer, Thor Financial

Today's newsletter was edited by Omkar Godbole

Market Moves

Bitcoin dipped below $42,000 early Friday, tracking losses in the U.S. stock futures.

The premium in the one-month bitcoin futures listed on the Chicago Mercantile Exchange almost flipped to discount, data provided by the crypto derivatives research firm Skew shows.

While the premium erosion represents weakening institutional participation, it may motivate non-directional traders anticipating a return of the premium to take a reverse cash and carry strategy.

It's a market-neutral position comprising a short position in the spot market against a long position in the futures. Traders took reverse cash and carry strategies after the March 2020 crash when futures were trading at a discount of 4% and higher, thus locking in a 4% riskless return as discussed back then.

Record Grayscale discount

Chart showing shares in Grayscale Bitcoin Trust trading at record discount to NAV (Skew)

The shares in Grayscale Bitcoin Trust, the largest digital asset manager in the world and a preferred venue for institutional investors to gain exposure to crypto, were trading at a record discount of -24.56% to the net asset value.

The premium flipped to discount in February 2021 and has steadily widened ever since due to several factors, including the launch of spot-based exchange-traded funds (ETFs) in Canada.

The persistent discount perhaps indicates investor skepticism regarding funds plans to covert the trust into a spot-based ETF. In December, crypto exchange Coinbase urged the U.S. Securities and Exchange Commission to allow conversion of the trust into an ETF.

Grayscale Investments is a digital asset management firm owned by Digital Currency Group, which also owns CoinDesk.

Dogecoin Rallies

The meme cryptocurrency dogecoin surged 15% early Friday, liquidating short positions worth over $7 million.

"The price rally came as electric-car maker Tesla went live with dogecoin payments for merchandise early Friday," CoinDesk's Shaurya Malwa reported. Tesla fans can now purchase beltbuckets, whistles, chargers and a quadbike using the memecoin on the official store.

Read: Grayscale Holds $43B in Crypto Assets Under Management, Down From $61B in Early November

A Message from Grayscale

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Grayscale® Digital Large Cap Fund, symbol: GDLC, offers exposure to a diversified basket of digital currencies. The fund holds large cap names that collectively comprise 70% of the crypto market, allowing it to capture asset class growth as the industry matures.

Access Grayscale® Digital Large Cap Fund by typing symbol: GDLC into your brokerage account, or learn more at https://grayscale.com/gdlc/

*For information on how GDLC defines the crypto market, see disclosures in the annual report.

Crypto Prices

Bitcoin (BTC)

See the latest price here

Ether (ETH)

See the latest price here

The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours:

Biggest Gainers:

Biggest Losers:

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

A Message from Brave

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Latest Headlines

New Year, New Money

New Money, a new series by CoinDesk, explores what it means to be part of the new “creator economy.” In the talk show hosted by Spencer Dinwiddie and Solo Ceesay, we hear from pro athletes, celebrities and social media influencers who are on the cutting edge of interacting directly with fans and developing new ways to generate revenue from their own celebrity. Learn more here.

Technician's Take

By Omkar Godbole

Bitcoin's death cross

Chart showing a death cross on bitcoin (Source: TradingView)

Bitcoin's daily chart shows the 50-day average has crossed below the 200-day average confirmed the so-called death cross, a bearish technical indicator.

While death cross headlines typically grab eyeballs, the indicator isn't particularly reliable, as discussed early this week. Average crossovers are lagging indicators and often trap traders on the wrong side of the market.

ICYMI

In case you missed it, here are the most recent episodes of "First Mover" on CoinDesk TV:

Legendary Cryptographer David Chaum on Web 3, Quantum Computing and Digital Currency

"First Mover" hosts are joined by world-renowned cryptographer and privacy advocate and CEO of Elixxir, David Chaum. Chaum shares his views on the current state of cryptocurrency and blockchain and the development of Web 3, among other topics. Chief Administrative Officer of FirstBank Wade Peery shares insights into the plan to offer stablecoin "USDF." Plus, comments on the crypto regulation turf war from Jones Day Partner James Burnham.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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