Bitcoin Backwardation Returns a Pattern That Often Marks Market Bottoms

Bitcoin has slipped back into backwardation a market condition that frequently shows up near major bottoms. In this setup futures contracts for BTC are priced below spot suggesting elevated fear stress and defensive positioning across derivatives. This shift arrives after bitcoin has dropped roughly 30 percent from its peak.
The decline in the three month annualized basis to around 4 percent highlights just how pressured the derivatives market has become. Historically every time backwardation has appeared it has lined up closely with major turning points. The pattern held in November 2022 March 2023 and August 2023 each instance aligning with a key bottom or sharp rebound in price.

Thomas Young Managing Partner at RUMJog Enterprises pointed out on X that backwardation is uncommon for bitcoin and tends to show up only during moments of forced selling panic or temporary capitulation. Young explains that the market typically takes one of two paths from here either a quick reversal once fear clears out or a final washout that also marks the end of the down move.

Backwardation marked the exact cycle low near fifteen thousand dollars during the FTX collapse in late 2022. It returned in March 2023 when BTC briefly lost the twenty thousand dollar level during the SVB fallout and USDC destabilization only to surge afterward. It resurfaced again in August 2023 when the selloff following the Grayscale ETF news pushed BTC toward twenty five thousand dollars which became a short lived bottom before a fast bounce.

The compression of the three month basis to its lowest reading since late 2022 signals collapsing demand for leveraged long positions. In bullish conditions traders usually pay a premium for forward exposure pushing the basis higher something that reached twenty seven percent in March 2024 when bitcoin topped seventy three thousand dollars.

Today’s much narrower spread reflects a more reserved market tone weaker risk appetite and lingering caution after the recent drop. Bitcoin often trades in mild contango during normal conditions and moves into steep contango when enthusiasm is extreme which makes the return to backwardation a notable sign of broader market stress.

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