SANTA MONICA, Calif.--(BUSINESS WIRE)--Element Group, a full-service advisory firm for the digital token capital markets, today released a newly published analysis indicating that bitcoin’s futures curve teetered between being effectively flat and in a backwardation state for most of Q1. According to the research, this downward curve is significant in that it implies that there is little conviction in the bitcoin futures marketplace, with the current spot price being greater than the expected futures spot price.
In analyzing bitcoin’s futures curve, Element reviewed trading patterns ranging from bitcoin’s first future trade in December 2017 to market movements as of the end of March 2018. In addition to outlining the findings and their importance in what continues to be a nascent marketplace, the Firm also offers its insights and perspectives on how bitcoin’s futures curve should be calculated, a debate that has consistently been at the center of cryptocurrency trading circles. For those new to futures trading, the report provides an educational overview of how trends of the futures curve are characterized.
“Given that bitcoin has only been trading for a few months, the ‘normal’ state of the markets has yet to be determined, and an efficient lending market for cryptocurrency does not yet exist,” said Stan Miroshnik, CEO and Co-Founder of Element Group. “Identifying and analyzing the initial trends in this largely uncharted and volatile sector is critical to creating a sustainable and lucrative next generation of capital markets.”
The report also takes a deep dive into the Commitments of Traders (COT) reports published by the CFTC, the positions of various types of traders, as well as the factors that have influenced trading activity over the past few months. For example, holding bitcoin poses risk associated with having the proper security infrastructure in place to prevent being hacked. Some traders consider this to be a cost, and therefore, put a premium over having access to bitcoin exposure in the future and are more willing to pay more for the futures price. Others view the futures product as a hedging mechanism and have no directional view of the future price of bitcoin, but rather are more focused on protecting downside deviations.
“We’ve found that there are many dynamics in the marketplace influencing bitcoin trading activity, with hedging and risk management as the leading motives,” said Thejas Nalval, Director of Portfolio. “Currently the large traditional types of holders involved in the bitcoin supply chain are willing to sell contracts at the current spot price, or even slightly lower, in order to protect the downside risk. This paradigm tends to manifest itself into this backwardation theme we’re saying play out with the futures.”
A link to access the full report can be found here: https://elementgroup.com/blog/research-bitcoin-futures-a-trading-review-of-q1-2018/.
About Element Group
Element Group is a full-service advisory firm for the digital token capital markets that delivers advisory, capital markets, technology and asset management services in an integrative manner. Element manages investor and client funds on a non-discretionary basis, investing in promising emerging protocol and dApp technologies and utility driven crypto-currencies. Element also executes token sales and ICOs and supports market-leading transactions with technology, bridging the gap between token buyers and issuers, and delivering thought leadership on structuring and process.