Bitcoin futures curve was in backwardation for most of 2018, a year when BTC lost 74% of its value, JPMorgan noted. 

JPMorgan’s cryptocurrency market analysts have pointed to the difference between Bitcoin’s (BTC) spot prices and BTC futures prices as a potential bearish sign for the market.

In a Thursday note to clients, JPMorgan analysts led by global market strategist Nikolaos Panigirtzoglou wrote that the Bitcoin market has returned to backwardation — a situation when the spot price is above futures prices. The analysts said that the past month's correction in crypto markets saw Bitcoin futures reversing into backwardation for the first time since 2018.

According to the strategists, Bitcoin futures backwardation should be viewed as a negative sign for BTC price despite a major rebound on the market over the past two days, with Bitcoin hitting $37,500 on Thursday. The analysts stressed that the Bitcoin futures curve was in backwardation for most of 2018, a year when Bitcoin dropped 74% after hitting its then-historic high of $20,000 in late 2017:

“We believe that the return to backwardation in recent weeks has been a negative signal pointing to a bear market [...] In our opinion the shift in Bitcoin futures into backwardation is a bearish signal echoing 2018.”

In the latest analysis, JPMorgan specifically looked at a 21-day moving average of the second Bitcoin futures spread over spot prices. The analysts observed an “unusual development and a reflection of how weak Bitcoin demand is at the moment from institutional investors” who trade futures contracts on the Chicago Mercantile Exchange.

The analysts also noted that Bitcoin’s weakened share in the total crypto market value is another concerning trend. As previously reported by Cointelegraph, Bitcoin dominance on crypto markets tanked to 40% in late May, marking the lowest share over the past three years after surging above 70% this January.

At the time of writing, Bitcoin’s share in the total crypto market capitalization is 43%, accounting for $682 billion out of the total crypto market value of $1.6 trillion, according to data from CoinMarketCap. Some analysts like crypto index provider Stack Funds believe that BTC dominance could retest its previous highs in the short term.


Bitcoin dominance percentage all-time chart. Source: CoinMarketCap

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