Bitcoin Futures Cash-And-Carry Trade Profitability Tanks, Caution Ahead?

As the selling pressure on the Bitcoin (BTC) price continues, the futures market also seems to be less exciting than before. Currently, the profitability in the Bitcoin futures cash-and-carry trade has been declining faster with little juice left for the traders to squeeze.

Bitcoin Cash-and-Carry Trades

The cash-and-carry trades are very popular in the derivatives market that involves the strategy of buying the asset in the spot market while simultaneously selling it in the futures market.

Just a few weeks before, Bitcoin futures traders were able to lock in a nearly risk-free annualized premium of 10% in the cash-and-carry trades. This also means that the difference between the BTC futures and the BTC spot price was 10% on an annualized basis.

However, the traders need capital to hold Bitcoin and margin along with the futures contracts thereby effectively reducing the returns to 5%. Interestingly, this annualized premium has now dropped to 6%, technically 3% considering the margin costs for holding in the spot markets.

If the annualized returns for the Bitcoin cash-and-carry trade fall under the risk-free return, it becomes less attractive. Popular crypto analyst Checkmate notes that there’s “End of the juice left to squeeze” in Bitcoin where the profitability in the bitcoin futures trades is no longer attractive. Thus, there’s every possibility that Bitcoin traders will start looking for other alternatives as returns for the Bitcoin futures cash-and-carry trade are no longer attractive to justify the associated risks.

The #Bitcoin futures cash-and-carry trade is very likely reaching the end of the juice left to squeeze.

A few weeks ago, traders could lock in an almost risk-free 10% annualised premium by being long spot, short futures. Technically this is ~5% as you need capital on both sides.… https://t.co/2TirvMW07t pic.twitter.com/sj1jTUBgST

— _Checkmate 🟠🔑⚡☢️🛢️ (@_Checkmatey_) June 24, 2024

BTC Price Movement Ahead

With the Bitcoin price already correcting more than 12% from its June highs, analysts have been speculating that $60,000 is imminent. Bitcoin analyst Checkmate also stated that the BTC sell-side risk ratio has reached levels suggesting that a major shift is imminent.

“All the profits that were going to be taken, have been. Same for losses,” he explained. The Bitcoin analyst added that the Bitcoin market would establish a new price range thereby igniting emotions such as fear, greed, panic, or euphoria, driving the next phase of market movement.

As shown below, the Bitcoin price is currently forming a falling wedge in the lower time frame with greater chances of falling to $60,000.

#BITCOIN LTF Chart$BTC is forming a falling wedge in the lower time frame. Open any trade only after a breakout.
Never open a trade blindly! pic.twitter.com/PksAAjzF0k

— Crypto Patel (@CryptoPatel) June 22, 2024