Savvy traders are locking returns of over 40% in the wake of bitcoin‘s widening contango – the spread between prices in futures and spot markets, also known as futures basis/premium.
“With the premium on bitcoin futures expanding to as high as 40% per annum for the June expiry, there is a lot of interest from cash and carry traders to arbitrage the premium and lock-in risk-free gains,” Pankaj Balani, co-founder and CEO of the Singapore-based Delta Exchange, told CoinDesk in a WhatsApp chat.
Cash and carry arbitrage is a market-neutral strategy aimed to profit from price discrepancies in one or more markets.
It involves buying an asset in the spot market against a short position in the futures market when the futures draw a significant premium relative to the spot price. That way, traders pocket a fixed return, as the premium decays over time and converges with the spot price on the expiry date.
According to data source Skew, bitcoin’s June expiry futures listed on major exchanges such as Binance, Huobi, OKEx, BitMEX and Deribit are currently drawing an annualized premium of 44% to 48%. Meanwhile, those listed on the Delta Exchange are trading at a premium of 30%.
So, a carry trade taken now will yield an annualized return of 44% to 48% – a number significantly higher than interest rates on crypto deposits offered by lending platforms such as Genesis and