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Traders are trying to profit from “cash and carry” crypto bets after the launch of ETFs

The launch of Wall Street’s first Bitcoin exchange-traded fund has created an opportunity for professional investors to make juicy profits with simple bets, made possible by the large shortage of players in the young crypto market. rice field.

NS Bitcoin price This week, $ 1.2 billion of new cash was poured into the ProShares Bitcoin Strategy ETF in just three days, demonstrating strong demand for new investment funds holding futures contracts to track cryptocurrency prices, setting a new record.

However, these inflows and the new record price of Bitcoin have also caught the eye of sophisticated traders looking to take advantage of the gap between the price of the coin itself and the price of the futures market.

ProShares ETFs are linked to CME futures. When new money flows into Bitcoin ETFs, funds need to buy futures to be exposed to the price of Bitcoin. Futures contracts expire every month. That is, the fund must regularly “roll” its holdings into the next month’s contract.

The recent surge in demand has pushed up the prices of short-term Bitcoin futures, causing them to become out of sync with the underlying cash market, creating a gap between the two prices at which transactions can profit.

“”[The ETF] Rolling the previous month’s contract and when the flow enters the ETF, the contract is pushed higher, [difference between futures and cash prices]Michael Bucella, a partner of Newyork-based hedge fund Block Tower, said.

The “simple cash and carry trade” of Bitcoin purchases and futures sales traded on the Chicago Mercantile Exchange offers an annual return of approximately 30%, and is the Chief Executive Officer of Canadian hedge fund and broker FRNT. Co-founder Stephen Owellet said.

In traditional markets, high frequency traders move quickly to fill such price gaps to profit and the opportunity disappears. However, the shortage of large players in the crypto industry means that few people are willing to deploy the additional capital needed to close the price difference.

Trading on CME is more expensive than elsewhere due to the high margin requirements of the exchange.

“Like many of the most successful cryptocurrency trading papers, there is no sophisticated arb player to manage and monitor spreads,” Ouellette focuses on arbitrage trading that takes advantage of price differences between markets. Mentioned the trading strategy that hit.

The opportunity to profit from this bet is amplified by the fact that Bitcoin is traded in different parts of the world. This means that traders can use multiple prices to buy coins in the cash market.

The knowledge that ProShares rolls back contracts means that traders believe they can rely on certain buyers in the futures market to boost prices.

Traders are trying to profit from “cash and carry” crypto bets after the launch of ETFs

Source link Traders are trying to profit from “cash and carry” crypto bets after the launch of ETFs

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