Bitcoin futures on CME overtake those on Binance to trade at biggest premium since November 2021

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

Three-month bitcoin futures, which are listed on the CME and widely regarded as representative of institutional activity, trade at an annualized premium of about 8.7% over the underlying benchmark index. The corresponding premium on offshore exchanges, mainly Binance, has risen to 6.3%, the highest level since January 2022.

At CME, the premium is the highest positive base since November 2021, according to data from Arcane Research, when Bitcoin was trading at record highs near $69,000 — nearly triple the current $24,850, CoinDesk data shows. (We’re talking premiums in the standard futures market here, not perpetuals, which are futures-like derivatives with no expiry.)

Bitcoin is up over 45% so far this year and has comfortably outperformed traditional risk assets, including Wall Street’s tech-heavy Nasdaq index. Futures typically trade at a premium, suggesting that leverage is on the bullish side when the underlying asset appreciates in value. Conversely, discounts are often observed during bear markets.

“The bull is back,” Arcane research analyst Vetle Lunde told CoinDesk.

Historically, futures on the CME traded at a relatively lower premium than those on Binance and other unregulated offshore entities, largely because these latter opportunities offered higher leverage. This means traders on offshore exchanges have been able to make larger bullish bets while depositing a relatively small amount of money, known as margin.

However, offshore exchanges have reduced leverage since the second half of 2021 and now account for just 30% of global futures activity, with the rest coming from the CME.

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

According to Arcane Research, open interest, or the number of open futures contracts, on the CME currently stands at 80,586 BTC — or 70% of global open interest. That’s significantly more than 28% during the peak of the bull run in April 2021.

“It’s rare for CME futures to trade at one [higher] Premium,” said Lunde. “With that in mind, CME is a big part of BTC futures activity overall. The offshore futures market is insignificantly small now with all activity centered on perpetuals.”

Looking ahead, a sustained upward move in the premium could prompt carry traders to return to the market. Cash-and-carry arbitrage involves buying bitcoin in the spot market and simultaneously selling futures contracts to collect the premium. Carry trading was very popular during the bull market when premiums on offshore exchanges reached as much as 40%.

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