Updated 2026-07-25
Contango describes a futures curve where contracts further out trade above spot, which is the normal state in crypto: traders pay a premium for leveraged long exposure, and holding spot has a financing cost. Backwardation is the inverted case, where later expiries trade below spot.
In crypto, backwardation is uncommon and usually means something: aggressive hedging, a scramble to short, or a liquidity event where nobody wants to fund a long. It often shows up alongside negative funding on perps, since both describe derivatives trading at a discount. Curve shape is a positioning and stress read rather than a directional call. A steep contango tells you leveraged longs are paying handsomely to be there, which is information about crowding, not about the next move.