London / New York Colour – 11 Mar 24

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QCP Capital2024/03/11 17:46

By:QCP Capital

– We saw a decisive breakthrough of 70k and 4k for BTC and ETH respectively today.
– The move appears to be driven by news of London Stock Exchange (LSE) accepting applications for Bitcoin, Ethereum ETN admission.
– Perp funding rates spiked above 100% on Deribit and Binance as the market continues to pile onto their already leveraged positions.
– This leveraged FOMO buying frenzy is pushing the whole forward curve even higher (over 30% p.a.).

What is the spot-forward spread trade?

– Speculators are buying BTC on leverage through margined futures causing the futures to trade at a large premium to spot price.
– Anyone with dollars to deploy can earn this premium by buying spot and selling the future/forward in a package with the desk.
– The spread trade is risk-free as the forward will settle to the spot price at maturity and the full principal along with the interest premium will be returned.

An indicative BTC spread run below:

     | BTC |Basis(USD)| AnnRate(%) | Tenor | |:--------|---------:|-------------:|--------:| | 29MAR24 | 1160.87 | 32.79 | 18 | | 26APR24 | 2648.37 | 29.27 | 46 | | 28JUN24 | 4810.87 | 22.44 | 109 | | 27SEP24 | 7883.37 | 20.04 | 200 | | 27DEC24 | 10165.9 | 17.76 | 291 | 
   

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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