Bitcoin Futures on CME Outpace Those on Binance to Trade at Widest Premium Since November 2021

Yes, you read the headline right. Bitcoin (BTC) futures really are, unusually, trading at a higher premium on the Chicago Mercantile Exchange (CME) than on Binance.

Three-month bitcoin futures listed on CME, widely considered a proxy for institutional activity, are trading at an annualized premium of around 8.7% to the underlying reference index. The equivalent premium on offshore exchanges, mainly Binance, has jumped to 6.3%, the highest since January 2022.

On CME, the premium is the highest positive basis since November 2021, according to data tracked by Arcane Research. Back then, bitcoin traded at record highs near $69,000 – almost three times the current $24,850, CoinDesk data show. (We are talking of premiums in standard futures market here, not perpetuals, which are futures-like derivatives with no expiry.)

Bitcoin has surged over 45% so far this year, outperforming traditional risk assets, including Wall Street's tech-heavy Nasdaq index, by a significant margin. Futures typically trade at a premium in a sign of leverage being skewed on the bullish side when the underlying asset is appreciating in value. Conversely, during bear markets, discounts are often observed.

"The bull is back," Arcane's research analyst Vetle Lunde told CoinDesk.

CME takes the lead

Historically, futures on the CME have traded at a relatively lower premium than those on Binance and other unregulated offshore entities, predominantly because these latter avenues offered higher leverage. That means traders on offshore exchanges were able to take bigger bullish bets while depositing a relatively small amount of money, called a margin.

However, offshore exchanges have cut back on leverage since the second half of 2021, and they now account for just 30% of the global futures activity, while the rest comes from the CME.

Another reason the CME has flipped offshore exchanges is that futures-based exchange-traded funds tied to bitcoin invest only in regulated CME futures contracts.

According to Arcane Research, open interest, or the number of open futures contracts on the CME, currently sits at 80,586 BTC – or 70% of the global open interest. That's significantly higher than 28% during the height of the bull run in April 2021.

"It is rare to see CME futures trade at a [higher] premium," Lunde said. "With that in mind, CME is a huge part of BTC futures activity as a whole. The offshore futures market is insignificantly small now, with all activity concentrated in perpetuals."

Looking forward, a continued move higher in the premium may see carry traders return to the market. The cash and carry arbitrage involves buying bitcoin in the spot market and simultaneously selling futures contracts in a bid to pocket the premium. Carry trading was quite popular during the bull run when premiums reached as high as 40% on offshore exchanges.