Looking to the Futures

Bitcoin (/BTCZ25) and Ethereum (/ETHZ25) Futures looked to continue their rebound from the recent November lows on Thursday as optimism of a December rate cut continues across the broader market. Despite showing strength early in the trading session, both Bitcoin and Ethereum retreated from their highs and closed relatively flat. /BTCZ25 settled down about -0.46% and /ETHZ25 settled up roughly +0.03% from Wednesday's close. Before their descent from the intraday highs, both of the largest cryptocurrencies rallied to two-week highs as expectations for the Federal Reserve to cut interest rates at next week's meeting continued to climb. According to the CME's FedWatch tool, there is currently an 87% chance of a 25-basis point cut during the December 10th meeting, up almost 20% from a month ago when the probability stood at 68.6%.

Since Bitcoin's recent bottom on November 21st where /BTC Futures saw a drop to nearly $80k, the largest cryptocurrency has seemed to finally stabilize over the past couple weeks. During this recent correction, which began shortly after Bitcoin reached all-time highs back in early October, /BTC Futures endured a significant amount of leverage being wiped out of the system which many attributed to the sharp decline. This rapid reduction in price produced something rather unusual when it comes to Bitcoin Futures comparing the contracts across different expiration dates. 

Bitcoin Futures experienced its greatest backwardation curve since the FTX cryptocurrency exchange collapse in November of 2022. In what is most considered to be a normal Futures market, the Futures price of a commodity is higher than the expected future spot price, or what is called a contango curve. In a contango market, the prices of long-dated futures contracts are higher than those of near-term contracts as traders anticipate that prices will rise over time and factor in things such as storage and financing costs. On the other hand, in what is a called a backwardation Futures curve, we see the opposite occurring where Futures prices decline over time and the spot price is higher than the prices of deferred futures contracts. This commonly occurs in response to immediate supply shortages or disruptions where short-term demand for spot prices exceeds future price expectations. This is particularly not a common structure for Bitcoin Futures as they almost always trade contango or at a premium. This backwardation has historically appeared during times of market stress and immense deleveraging which is what we have seen with Bitcoin over the past month. This structure can also cause basis spreads to collapse resulting in basis traders and funds having to unwind their positions as well. Those attempting to capture contango yield by buying spot and selling Futures, expecting this spread to converge as the contracts approach expiration, would then have to sell spot and buy back their short Futures positions to unwind and exit this trade. This could offer one explanation for the roughly $4 billion Bitcoin ETF outflows that ensued during the months of October and November as funds began to unwind these basis trades. 

The Bitcoin Futures market has since returned to a contango curve and looked to rebound from its recent lows, reclaiming and hovering above $90k. With many key economic events coming up in the next couple weeks, traders will be eyeing Bitcoin to see if it can reclaim a perceived key $100k level or if more selling pressure is yet to come. 
 

/BTCZ25 settled Thursday right below the 20-day Simple Moving Average after attempting to push through it during the session and continues its trend well below the 50, 100, & 200-day SMAs as well. The 14-day RSI settled at 44.966 on Thursday signaling rather neutral momentum but some mild downward pressure. Volume has trended lower than average in the past couple of trading sessions with 5,185 front-month contracts being traded on Thursday. 

10:00 AM ET: Personal Income (delayed report)

10:00 AM ET: Personal Spending (delayed report)

10:00 AM ET: PCE Index (delayed report)

10:00 AM ET: PCE (year-over-year)

10:00 AM ET: Core PCE Index (delayed report)

10:00 AM ET: Core PCE (year-over-year)

10:00 AM ET: Consumer Sentiment (prelim)

3:00 PM ET: Consumer Credit
 

New futures products are available to trade with a futures-approved account on all thinkorswim platforms: 

• Ripple (/XRP)
• Micro Ripple (/MXP)
• Micro Corn (/MZC)
• Micro Wheat (/MZW)
• Micro Soybean (/MZS)
• Micro Soybean Oil Futures (/MZL)
• Micro Soybean Meal Futures (/MZM)
• 1 OZ Gold (/1OZ)
• Solana (/SOL)
• Micro Solana (/MSL)

Visit the Schwab.com Futures Markets page to explore the wide variety of futures contracts available for trading through Charles Schwab Futures and Forex LLC.