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How To Hedge In Backwardation
Backwardation Is a Bullish Indicator
Bitcoin entered long-term backwardation last June.
In other articles, I have outlined why backwardation is fundamentally bullish and contango is fundamentally bearish yet sucks as a timing indicator.
The difference between futures and the spot market is known as the BASIS. When futures are under spot it is in known as backwardation. When futures are over the spot market it is known as a contango.
Why does BASIS suck so badly for timing?
Well, because backwardation can occur for an instant during a downward spike which is a regular occurrence in a bull market as sell stops are hit. It can last for hours when a large player gets liquidated for over-leveraging which occurred in March 2020 with the Covid bottom. Or it can last for…
