Bitcoin Cash and Carry Q1 2018

9 Jan 2018

A lot of traders are coming to Bitcoin in recent months hoping for 1000% returns to grace them as if the run is sure to continue. Having seen multiple bubble and bust cycles in my time trading Bitcoin since 2013 I've opted for a different approach. Starting last year I began employing a futures cash-and-carry strategy using the Bitmex Exchange. Usually and especially during bullish times the quarterly futures contracts open and remain at a premium to spot market price. Over the duration of the contract as it approaches expiration the premium decays. As a bonus when the spot price experiences volatile swings to the downside the premium can turn into a discount. What I do at the beginning of the cycle is sell the equivalent capital value in futures at the premium and hold onto them to expiration or to an inversion of premium to discount. This Quarter's arbitrage began at 11% so in theory I am able to lock in the "value" of Bitcoin at around $18,000/BTC and capture a 5.5% return. It's not sexy but it's consistent and filters through the volatility.

30 Jan 2018

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The premium has now come within 1-2% of spot as the hype has died down. Right now the short futures are acting like a hedge for Bitcoin valued at $17,000. Looking at the June futures there is a chance for perhaps a 3-4% premium but that's hardly worth it.