The optimistic outlook following Donald Trump’s win in the Presidential elections on November 5 has entirely dissipated, as indicated by a metric associated with CME bitcoin (BTC) futures.
This metric focuses on the difference in pricing between “continuous” next month and front-month standard BTC futures traded on this major derivatives exchange. A continuous contract provides a calculated overview of a series of futures contracts that expire gradually, facilitating a seamless historical data series for analysis.
The spread has contracted to $495, marking its lowest point since November 5 after hitting a peak of $1,705 on December 17. This shift reflects a complete reversal of the initial Trump surge, indicating a decline in bullish market sentiment.
“The shrinking difference between front-month and next-month CME Bitcoin futures may imply that traders are adjusting their price expectations,” noted Thomas Erdösi, head of product at CF Benchmarks.
The erosion of the Trump bump likely indicates that market sentiment has shifted away from the belief that having a pro-crypto president in office is advantageous, with macroeconomic factors now taking precedence.
“Currently, the front contract basis has significantly adjusted downward since the start of March, which suggests that the primary driver behind the recent rally—the election of President Trump—has been fully factored into prices,” Erdösi commented.
This trend is already observable. Both BTC and the tech-heavy Nasdaq index have seen declines of 20% and 8%, respectively, since early February, influenced by various factors including geopolitical tensions, tariffs initiated by Trump, and concerns regarding inflation and economic growth.
Moreover, the bitcoin market faced disappointment due to the lack of new acquisitions in Trump’s strategic digital asset reserve initiative. Recently, Trump signed an executive action to establish a strategic reserve that incorporates BTC confiscated during enforcement operations.
“The communication about the Strategic Bitcoin Reserve did not align with market expectations. Many had anticipated that the Reserve would procure additional Bitcoin, but instead, it was stated they would retain their existing and confiscated Bitcoin. While this is a positive step, it led to a sharp downturn in Bitcoin’s value,” Ian Balina, founder and CEO of Token Metrics, shared in an email.
Futures remain in contango
Despite the narrowing spread between next-month and front-month CME futures contracts, the overall curve is still in contango, where longer-dated futures contracts are priced higher than those with nearer expirations.
This situation is typical in markets due to factors such as storage, financing costs, insurance expenses, and the expectation of future price increases.
“The persistence of positive perpetual funding rates and a contango in the futures basis implies that the recent price movement has been driven by unleveraged spot longs being squeezed, rather than a widespread market downturn,” Erdösi pointed out.