In the wake of the increasing Bitcoin contango – the spread between prices on futures and spot markets, also known as the futures basis / premium – savvy traders achieve returns of over 40%.
“Since the premium for Bitcoin futures increases to up to 40% per year by the end of June, there is a great interest among cash and carry traders in brokering the premium and making risk-free profits,” said Pankaj Balani, co-founder and CEO of Singapore-based Delta Exchange, CoinDesk said in a WhatsApp chat.
Cash and Carry Arbitrage is a market neutral strategy that aims to capitalize on price differences in one or more markets.
The point is to buy an asset on the spot market for a short position on the futures market when the futures contracts receive a substantial premium relative to the spot price. This way, traders get a fixed rate of return as the premium decreases over time and converges with the spot rate on the expiration date.
According to data source Skew, Bitcoin expiration futures listed on major exchanges such as Binance, Huobi, OKEx, BitMEX and Deribit are currently pulling an annualized premium of 44% to 48% in June. In the meantime, those listed on the Delta Exchange are trading at a premium of 30%.
So a carry trade now completed will bring an annualized return of 44% to 48% – a number that is significantly higher than the crypto deposit rates offered by lending platforms like Genesis and BlockFi, or the returns on government bonds in Emerging markets.
“We initiated that today,” said Patrick Heusser, head of trading at Switzerland-based Crypto Finance AG, in a Telegram chat, adding that the widening of the base suggests that Bitcoin’s recent outbreak is over 60,000 US dollar is driven by derivatives.
CoinDesk 20 data shows that early Saturday, Bitcoin broke out of a multi-week consolidation with a sudden surge from $ 3,000 to $ 61,065. The futures premium on the most important stock exchanges rose together with the spot market price from around 32% to over 40%.
Some analysts are now watching the weekly closing price (Sunday, 23:59 UTC). “BTC is back over $ 60,000! If we can close the week up here, then it will be moon time, ”tweeted analyst Lark Davis earlier this morning.
However, the market chatter shows growing concerns about the rise in the funding rate for perpetual futures – the cost of holding long positions is calculated and paid out every eight hours. As a result, it can be difficult for the cryptocurrency to hit a daily or weekly closing price above $ 60,000.
At press time, bitcoin is changing hands near $ 59,700.