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

Bitcoin futures cash-and-carry trades has significantly declined, with annualized premiums dropping from 10% to 6%. BTC price drop to $60,000 much likely going ahead.
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Bitcoin Futures Cash-And-Carry Trade Profitability Tanks, Caution Ahead?

Highlights

  • Bitcoin futures cash-and-carry trade profitability premium drops from 10% to 6%.
  • Bitcoin traders might shift towards alternative strategies as profitability drops considerably.
  • BTC price continues to remain in selling pressure with analysts expecting further correction to $60,000.

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.

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.

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Bhushan Akolkar

Bhushan is a seasoned crypto writer with over eight years of experience spanning more than 10,000 contributions across multiple platforms like CoinGape, CoinSpeaker, Bitcoinist, Crypto News Flash, and others. Being a Fintech enthusiast, he loves reporting across Crypto, Blockchain, DeFi, Global Macros with a keen understanding in financial markets. 

He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills. Bhushan has a bachelors degree in electronics engineering, however, his interest in finance and economics drives him to crypto and blockchain.

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