Bitcoin Futures Premium Over Spot Shrinking as CME Products Near

(Bloomberg) -- The exorbitant price gap between bitcoin futures and the underlying digital currency is beginning to dwindle.

The spread between the two has narrowed by more than half, in a sign that the bitcoin futures market may be getting more efficient less than a week after the futures’ debut on Cboe Global Markets Inc. It cost about $414 more to buy the contract than to buy bitcoin on the spot market, a premium of 2.5 percent as of 11:54 a.m., according to Bloomberg data. 

Earlier this week the futures were as much as 13 percent more expensive than the digital currency, an unusually pricey premium that many investors deemed too steep to persist. The thinking was that the gap set up an arbitrage opportunity that traders would seize once the futures market showed signs of stability.

Bitcoin Futures Premium Over Spot Shrinking as CME Products Near

That trade would require someone comfortable enough to set up a digital wallet to buy and secure bitcoin and then sell futures against it before reversing the trade when the futures contract came due to pocket a nearly riskless profit.

Short sellers, investors betting on the cryptocurrency’s decline, may also be playing a role in shrinking the gap. Interactive Brokers Group Inc. said earlier this week that it plans to let bitcoin bears bet against the futures contracts, under certain conditions. When Cboe first got the futures trading, the brokerage only allowed its clients to take long positions.

The compressing premium comes as CME Group Inc. prepares to launch its own competing bitcoin futures product this weekend. CME, the world’s largest futures exchange, could expand the universe of speculators and investors in bitcoin derivatives even further. Dave Weisberger, CEO of cryptocurrency data and order routing company CoinRoutes, said that the CME’s products could add more activity and bring the premium down even more.

“Maybe this will be the tipping point, where the premium that really doesn’t make sense starts to come in.” Weisberger said. “It’s really about watching that.”

©2017 Bloomberg L.P.