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Backwardation
A market condition where a futures contract trades below the current spot price, the structural opposite of contango.
Backwardation describes a market condition where a futures contract trades below the current spot price of its underlying asset — the structural opposite of contango (see Kaavon's "Contango" glossary definition).
In crypto specifically, backwardation is comparatively less common than contango and is commonly associated with bearish sentiment, elevated demand to short via futures, or unusual stress in spot-market liquidity relative to the futures market.
Examples
- A futures contract trading below the current spot price is in backwardation, the less common of the two conditions in crypto markets.
- Backwardation is commonly associated with bearish sentiment or elevated demand to short an asset through futures rather than spot.