Savvy traders lock in gains of over 40% due to bitcoin’s expanding contango – the spread between futures prices and spot markets, also known as futures basis / premium.
“With the premium on bitcoin’s future expanding to as much as 40% a year for the end of June, there is a lot of interest from cash and carrier traders to arbitrate the premium and risk-free returns locked up,” Pankaj Balani , co -founder and CEO of the Delta Exchange in Singapore, told CoinDesk in a WhatsApp conversation.
Cash and carry arbitration is a market-neutral strategy aimed at benefiting from price disparities in one or more markets.
It involves the purchase of an asset in the spot market against a short position in the futures market when the future incurs a significant premium over the current price. That way, traders are pocketing fixed earnings, as the premium declines over time and matches the spot price at the expiration date.
According to a Skew data source, bitcoin’s expiry futures in June listed on major exchanges like Binance, Huobi, OKEx, BitMEX, and Deribit are currently drawing an annual premium of 44% to 48%. Meanwhile, those listed on the Delta Exchange are trading for a 30% premium.
Thus, carry trade taken now will yield annual returns of 44% to 48% – a number well above interest rates on crypto deposits offered by lending platforms such as Genesis and BlockFi or government bond products in economies that are n emerge.
“That’s what we started today,” Patrick Heusser, head of trading at Crypto Finance AG of Switzerland, said in a Telegram talk, adding that broadening the base indicates that the latest cut by bitcoin above $ 60,000 is being driven by derivatives.
CoinDesk 20 data shows bitcoin broke out of a multi-week consolidation early Saturday with a sharp rise of $ 3,000 to $ 61,065. The futures premium on large exchanges increased along with the spot market price, rising from around 32% to over 40%.
Some analysts are now eyeing the weekly close (Sunday, 23:59 UTC). “BTC is back over $ 60,000! If we can close the week above here, then moon time, ”analyst Lark Davis tweeted early today.
Anyway, market chat shows growing concerns over the flat rate of future funding – the cost of holding long positions counted and paid every eight hours. As such, the cryptocurrency may be having a hard time securing daily or weekly close above $ 60,000.
At press time, bitcoin is changing hands near $ 59,700.