Following Donald Trump’s victory in the Presidential elections on Nov. 5, the previous bullish sentiment has significantly diminished, as indicated by a metric associated with CME bitcoin (BTC) futures.
This metric focuses on the spread between the “continuous” next-month futures and the front-month standard BTC futures traded on the global derivatives market. A continuous contract provides a calculated representation of a series of futures contracts that expire successively, facilitating a continuous historical data series for analysis.
Currently, the spread has narrowed to $495, marking the lowest point since Nov. 5, having previously peaked at $1,705 on Dec. 17, according to TradingView data. This change indicates a full reversal of the Trump bump, signaling weakened bullish sentiment within the market.
“The decreasing spread between front-month and next-month CME Bitcoin futures may indicate that traders are adjusting their price expectations,” stated Thomas Erdösi, head of product at CF Benchmarks, in comments to CoinDesk.
The regression of the Trump bump suggests that the market is moving beyond the belief that having a pro-crypto President is beneficial for the industry, with macroeconomic factors taking precedence once again.
“The evidence shows that the front contract basis has dropped significantly since the start of March, indicating that the primary trigger for the recent rally—the election of President Trump—has already been factored into the market,” Erdosi remarked.
This trend is already evident, as both BTC and Wall Street’s technology-focused index, Nasdaq, have fallen by 20% and 8%, respectively, since early February, influenced by various factors such as geopolitical uncertainties, Trump’s tariffs, and concerns regarding inflation and economic growth.
Moreover, the bitcoin market is also grappling with letdowns stemming from the lack of new purchases related to Trump’s strategic digital asset reserve initiative. Recently, Trump signed an executive order to establish a strategic reserve that includes BTC obtained through enforcement actions.
“The Strategic Bitcoin Reserve announcement did not align with market expectations. Many had anticipated that the Reserve would acquire new Bitcoin, but they clarified that no sales would take place from their existing Bitcoin or any confiscated Bitcoin. While this is a favorable development, it led to a significant drop in Bitcoin’s price,” Ian Balina, founder and CEO of Token Metrics, shared with CoinDesk via email.
Futures Are Still in Contango
Although the spread between the next-month and front-month CME futures contracts has decreased, the entire curve still shows contango, where longer-dated futures contracts are priced at a premium compared to nearer-dated contracts.
This situation is common across various markets due to factors including storage, financing, insurance costs, and forecasts of price rises in the upcoming weeks or months.
“The persistence of positive perpetual funding rates and the ongoing contango in the futures basis imply that the recent shift is driven by unleveraged spot long positions being squeezed, rather than a widespread market contagion,” Erdösi noted.
