Why Bitcoin Derivative Are Lagging Spot — and Why This Could Be a Bullish Signal

Bitcoin prices in derivatives contracts on Binance are currently about 40-50 USD lower than spot prices. This gap is significantly wider than previous market cycles, even when Bitcoin is trading near its All-Time-High (ATH).

This marks a notable deviation from previous trends and raises questions for investors about its significance in the current market environment.

Why are Bitcoin derivative products priced lower than spot prices?

During the 2021-2022 period, when derivative prices dropped below spot prices, it typically signaled a bearish market. At that time, such a gap was often accompanied by significant price declines, reflecting negative sentiment and selling pressure from traders.

Conversely, when derivatives trade higher than spot prices, it usually indicates a bullish market. Bitcoin would then continue to reach new highs.

However, the current situation is very different. Despite Bitcoin reaching its All-Time-High, derivative prices are falling deeper below spot prices. This suggests that new market forces may be at work.

Alphractal believes one possible reason behind this phenomenon is pressure from large institutions.

"This could reflect institutional risk hedging, price arbitrage, or ETF momentum," Alphractal said.

João Wedson, Alphractal's founder, added that this situation could lead to a Short Squeeze. A Short Squeeze occurs when Bitcoin's price suddenly spikes, forcing short sellers to buy back BTC to cover their positions. Their urgent buying increases market demand.

"If the BTC perpetual price gap on Binance returns to positive, it's a sign that prices are about to explode. Until then, we can say that many institutions have been applying pressure through Shorts, which could be good for a potential Short Squeeze as they are going against the OG Whales," João Wedson explained.

Crypto Rover predicts a major Short Squeeze for Bitcoin

In his latest analysis video, Crypto Rover also emphasized that Bitcoin's largest Short Squeeze is about to occur.

According to him, the sensitive price zone for Bitcoin is around 110,000-111,000 USD. This is where a large amount of liquidation is concentrated. If Bitcoin's price breaks through this zone, many short positions will be liquidated. This could trigger a powerful new price surge.

"So, it's crucial to break through this high. And whenever we do that, we might move up quickly again... I'm seeing a large amount of current liquidation accumulating above us around 110,000-111,000 USD. There's a large Bitcoin short liquidation building up here," Crypto Rover predicted.

João Wedson's explanation and Crypto Rover's prediction both suggest that the current price gap could be a positive signal for Bitcoin. However, this perspective differs from historical patterns.

This indicates that the market is entering an unprecedented new phase. This change complicates short-term and long-term forecasts, making price volatility prediction more challenging than ever.