Crypto currency Many reasons for the decline in the markets can be put forward. However, one of the problems that appear in the middle recently is one of the main reasons for the decline. Although it seems complex for most investors, we will go to the details of this today. Why do ETF outputs increase? Why did BTC price suffered rapid losses?
BTC CME Trade Strategy
The demand increases in the bull markets and the contracts are traded with positive premiums in CME term transactions with increasing demand. We saw the strategy of the pursuit of arbitrage earnings by taking a positive premium with a positive premium on the GBTC front until the weakening of 2021.
For a long time for CME Bitcoin $89,051.77 Basis Trade In other words, the definitive profitable arbitrage strategy attracted great attention. Trump’s interest in crypto currencies, strategic Bitcoin reserve story and so on, and we remember the news that CME open positions have reached new AC levels. However, with the recent events, for example, the breakage of optimism on interest rate cuts, the strategic Bitcoin reserves, and some states of some states vote (including republicans, this is the interesting side of the work) voted this gain strategy.
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Bitcoin Basis Trade
BitcoinWe talked about the difference between the term price of the spot and the price. The strategy of earning a profit from this difference is called a press trade. There are two rules. The term price (3 -month term contract in CME) is always equalized with the spot price at the end of the maturity. Since the second rule is traded with a positive premium, you will buy the opportunity to sell BTC, which is 100 thousand dollars today with a positive premium, to 105 thousand dollars after 3 months.
Spot price is the current price of BTC in the central stock markets. The price of futures is BitcoinIt is an agreement to receive/sell at a certain date in the future at a certain price. What we said, the price of the maturity of this understanding is traded with a positive premium, so the spotlight is above the price.
SPOT price 89 thousand dollars, let’s say the price of 3 months is around 93 thousand dollars. With Basis Trade BTC ETF You will receive (or you get BTC from direct spot markets) at the same time you get a CME contract. Spotta 89 thousand, 93 thousand dollars in the term with the opportunity to buy 2 different places with the opportunity to sell. We wait 3 months and even if the price falls, we get as much as the futures premium.
Basis return was up to double -digit levels during the intense demand. However, it has recently declined to significant levels (February 24 %). The decline of the return on the bond interest here removed the strategy for hedge funds from being profitable. On December 26, the earnings potential up to 21.55 %brought a huge spot and ETF demand, while the gains at the point we have reached today were stretched to May. This earning rate fell up to -47.81%in the midst of the concern about the collapse of November 2022.
In summary hedge The positive premium that the funds locked at the beginning of the maturity is a definite gain. We see sales in both spot and ETF channel, as this definite earnings decreases in the environment in which the strategy decreases in the environment where alternative safe investment products offer lower return. When does this improve? With the disappearance of negativity that strangles the risk markets, the futures premium needs to be increased again.
For us to balancing CME Futures The normalization of open positions may also balance the pressure on the market. Currently, open positions are around $ 15 billion and normalization is essential.
Responsibility Rejection: The information contained in this article does not contain investment advice. Investors should be aware that crypto currencies carry high volatility and thus risk and carry out their operations in line with their own research.
