Three-Month Futures Basis Below Two-Year Treasury

Glassnode reports that the three-month futures basis has consistently paid less than a two-year Treasury since February. This trend is noteworthy as it mirrors only one other instance on record, which occurred from August 2022 into January 2023. The implications of this development could significantly impact market liquidity and trading volumes. For more details, see the original tweet.

What Happened

The broader crypto market is currently exhibiting mixed signals, with varying momentum across major assets. Glassnode’s analysis of the futures market indicates that the three-month basis has remained below the two-year Treasury rate for an extended period. This unusual situation tends to pressure market depth and trading volumes, suggesting that traders might be less inclined to engage in higher-risk strategies. Such developments could lead to increased caution among market participants.

The Essentials

• Glassnode reports the three-month futures basis has underperformed compared to the two-year Treasury since February. This trend has only previously occurred between August 2022 and January 2023, which ended at a cycle low. As a result, this could influence market depth and trading volumes across the crypto landscape. The current environment calls for heightened awareness among traders as this trend unfolds.

Price Action Breakdown

Currently, the crypto market shows notable volatility, with major assets responding to macroeconomic factors. The three-month futures basis is significantly lagging behind the two-year Treasury, which raises concerns about the overall liquidity in the market. As observed, this trend may lead to lower trading volumes and a more cautious approach from investors, which could exacerbate existing market anxieties.

Glassnode is a leading provider of on-chain market intelligence, focusing on blockchain data analytics. Their insights are crucial for understanding market dynamics, especially as they relate to derivatives and futures trading. The jurisdiction of their analysis extends to both traditional and crypto financial markets, making their observations particularly relevant in current economic conditions.

What Traders Are Watching Next

What traders should watch next is the potential for further declines in market depth as the futures basis remains under pressure. Key levels to monitor include the relationship between short-term and long-term treasury yields, which could dictate trader sentiment and engagement. As this situation evolves, investors may need to reassess their strategies in light of the implications for liquidity risks and market participation.

This article is for informational purposes only and does not constitute financial advice.