Is CME Really Net Short?
We can somewhat confirm the above thesis by looking at annualized basis for various futures expiries across exchanges. CME’s traders are institutions, and thus more prudent. Seeing a 5-10% basis opportunity is extremely attractive to them. On the flip side, most traders on Binance or FTX are trying to increase their long exposure to BTC. As a result, we see a relatively lower basis on CME, as basis extraction is the crowded trade on the exchange.
Crypto-native exchanges have a perma-bid from apes when the market is moving. There aren’t a ton of funds and traders playing the basis extraction game, so basis trade yield is much higher as demand for long futures outpaces demand to short them. If funds trading on CME could trade on Binance, Kraken, FTX, and other crypto-native exchanges, we would see better efficiency in the market as they pounce on the opportunity to lock in a higher basis yield.