SchamBTC

5 month repeatable pattern. XBT Backwardation for Christmas?

Short
BITMEX:XBT   Bitcoin / U.S. Dollar Index
While studying XBT Contango and Backwardation I noticed a repeatable pattern that XBT was going into backwardation every month for the last 5 months around the same time. I don't have an answer for this, but my assumption is it has to do with commercial interests and how they are driving the XBT Futures market.

The strategy does not always catch the top/bottom perfectly, but it would have been profitable 5 months in a row if executed properly. I noticed that every month for the last 5 months XBT went in backwardation at the end of every month around the 24th - 28th. Typically backwardation is a great buying opportunity to go long, however since the current trend is bearish i prefer to trade with current trend. Since backwardation was repeatable, and likely driven by commercial interest or other fundamentals, I was curious to see if there was a time each month that would be best time to take a short? So far I have noticed between the 6th and 10th each month would provide a profitable trade to hold until later in the month in hopes of catching backwardation to cover.

All this analysis was made possible with my indicator script the XBT Contango Calculator. I have been making improvements to the original code and hope to release Version 3 in the near future.
Trade active: Got to put your money where your mouth is. Entered a short position yesterday December 9th on XBT March Futures Contract. Avg price = $7700. Small Position, with loose stop so i can try to hold until later in month and not get shaken out.
Trade active: BTC was looking very weak so last night Dec 16th, I sold March Futures again at $7,122 doubling my short position. Tightened up my stops. So far so good.
Also, another note is that premium on March futures contract dropped from +$139 down to +35 today which is an additional $100 profit over same trade with spot XBTUSD. However, please note that XBT futures are not nearly as liquid and stop-market orders can have big slippage during fast moves. I have slipped over $100 dollars before, so be aware. I am using small position and see the risk-reward as zero using Futures in this scenario, because slippage is $100 risk but I am betting on making an extra $100+ on premium decay during price drop. Futures also don't pay/receive funding, another thing to consider.
Trade closed: stop reached: Just an update on this trade. XBT went in backwardation on December 17th. Instead of taking profit, i didnt stick to my plan and held on hoping for more downside. Luckily I moved my trailing stop and got stopped out on the pump on December 18th. It was a profitable trade but not as profitable if i had stuck to my plan. Not sure if we will see backwardation this month by Dec 28th. If this pattern does not repeat for a 6th month then it may be a good sign hopefully indicating a trend reversal on the horizon. Regardless backwardation has proved to been a reliable buy signal and will act accordingly
Feel free to reach out to me @SchamBTC on Twitter or Telegram.
If you like my work you can show your support buy sending a donation to the following BTC address: 3CypEdvBcvVHbqzHUt1FDiUG53U7pYWviV

Comments

Thanks for share!
Helpful info.

Waiting for the V3!
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SchamBTC Che_Trader
@Che_Trader, Your welcome. Thank you for the feedback. V3 is now available in both Bitmex and Deribit versions. Go to my scripts to view. Email me at XBTcontango@protonmail.com if you are interested
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Very good ;) Thankssssssssssssssssssss
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