Last week, Bitcoin experienced a thrilling “Big Rage” market, with a single-day drop of over 10%, nearly breaching the $60,000 level. Although it then rebounded strongly back to around $70,000, does this rapid sell-off constitute a so-called “capitulation sell-off”? That is, investors panic and sell at a loss, completely releasing selling pressure and paving the way for the next bull market.
However, from the perspective of derivatives markets, the answer is likely no. According to Amberdata derivatives director Greg Magadini, signals from the futures market indicate that Bitcoin may still have further downside potential.
In his Monday market report, Greg Magadini pointed out that during this decline, the futures basis (the spread between futures and spot prices) reacted noticeably cold, without the dramatic changes often seen in bear markets. He said:
The futures basis hardly showed the ‘market reaction’ it should have, making me unable to be certain that we have experienced a true capitulation moment.
What he refers to is the typical change in the relationship between futures and spot prices during a bearish trend, especially during market clearing phases.
Futures allow traders to buy or sell the underlying asset, such as Bitcoin, at a predetermined price at a specific future time. Investors can bet on price movements through futures—going long when bullish, short when expecting a decline—without actually holding Bitcoin itself. Therefore, the spread between futures and spot prices (the basis) often becomes an important indicator of market sentiment and positioning.
When futures prices are significantly higher than spot, it indicates a bullish market, with investors willing to pay a premium for future price increases; conversely, when futures prices fall below spot, creating a discount, it signals heavy selling pressure from the bears and market pessimism.
Looking back at Bitcoin history, bear markets often bottom out when futures and perpetual contracts show a “large discount.” This extreme negative spread reflects a complete collapse of market confidence, with holders panic-selling (i.e., “capitulation”), marking the final washout phase of the bear market.
However, during last week’s intense volatility, the futures discount was only fleeting.
Greg Magadini noted that although the 90-day futures basis for Bitcoin did gradually decline with each dip, the fluctuation was almost never more than -100 basis points (bps), and no deep discount formed. Currently, Bitcoin’s fixed-term futures basis remains around 4%, nearly equal to risk-free US Treasury yields.
If we look back to the end of the 2022 bear market, when Bitcoin fell below $20,000, the 90-day futures once showed a discount of up to 9%, clearly reflecting extreme market pessimism and widespread deleveraging.
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