Bitcoin

<p>Bitcoin&#39;s recent price crash to $50,000 has significantly impacted carry trading, a popular strategy that profits from pricing discrepancies between markets. This sharp decline, which represents an 18% drop within 24 hours, has narrowed the gap between futures and spot prices. As a result, the attractiveness of carry trades, which leverage these discrepancies, has been greatly reduced.</p><h3 id="declining-premiums-impact-strategy">Declining Premiums Impact Strategy</h3><p>The sell-off is part of a broader risk aversion trend in global markets, likely influenced by the rising value of the anti-risk Japanese yen and instability in the U.S. bond market. According to Velo Data, the annualized three-month futures premium on Binance has fallen to 3.32%, its lowest since April 2023. Similar declines are observed on crypto exchanges OKX and Deribit. On the regulated Chicago Mercantile Exchange, futures are now trading in line with spot prices, further diminishing the returns on cash and carry strategies. Previously, these strategies were lucrative when futures traded at a significant premium, often over 20%, and were widely adopted by institutions in the first quarter.</p><h3 id="conclusion">Conclusion</h3><p>The recent Bitcoin price crash has disrupted the profitability of carry trading strategies by narrowing the gap between futures and spot prices. As premiums on futures contracts fall, the appeal of these strategies diminishes, aligning returns closer to those of the 10-year U.S. Treasury note. This shift highlights the volatility and risk inherent in cryptocurrency markets, affecting institutional strategies that previously capitalized on higher premiums.</p>

Bitcoin Price Plunge to $50K Disrupts Carry Trading

Table of Contents

DroomDroom

Other articles published on Aug 5, 2024

Neiro meme coin plummets 60% following Vitalik Buterin’s token sell-off

FBI’s crypto warning as India, Australia join global crackdown: ‘Fraud alert!’

S&P 500 Faces Key Support Level: Bullish Run Ahead?

Ethereum ETFs Experience $406 Million Outflows Amid Rising Interest In DigiHorse (DIGI)

Donald Trump Launches Bitcoin-Themed Sneakers, Quickly Sell Out

Do Kwon to be Extradited to South Korea: Montenegro Court Upholds Decision

Join our free newsletter for daily crypto updates!