Carry trading, a popular strategy from the first quarter, involves profiting from pricing discrepancies between two markets.
Bitcoin's (BTC) latest price crash has narrowed the gap between futures and spot prices, reducing the appeal of carry trades that aim to capitalize on discrepancies between the two markets.
The flagship cryptocurrency crashed over 18% to $50,000 in 24 hours, hitting its lowest level since February 2024. The sell-off, which is part of broad-based risk aversion in global markets, is likely driven by the sharp rise in the anti-risk Japanese yen and the U.S. bond market shenanigans.
As a result of the price crash, the annualized three-month futures premium on leading crypto exchange Binance has dropped to 3.32%, the lowest since April 2023, according to Velo Data. A similar slide in futures premiums is being seen on crypto exchanges OKX and Deribit.
Meanwhile, futures on the regulated Chicago Mercantile Exchange, preferred by institutions, are now trading pretty much in line with spot prices.
This means the return on the classic cash and carry strategy, which involves taking a long position in the spot market or the U.S.-listed ETFs and simultaneously selling futures, is now less than or at par with the 10-year U.S. Treasury note.
The strategy was popular among institutions in Q1 when futures traded at a premium of over 20% and is said to have accounted for a material share of inflows into the spot ETFs.
The above is the detailed content of Bitcoin Price Crash to $50K Dashes Carry Traders' Hopes. For more information, please follow other related articles on the PHP Chinese website!
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