Is Bitcoin Futures Cash-and-Carry Trade Profitability Fading?

Bitcoin futures cash and carry trades have dropped significantly as annualized premiums fell from 10% to 6%. BTC’s price may decrease to $60,000.

Highlights

• The profitability premium of bitcoin futures cash-and-carry trades has gone down from 10% to 6%.
• There may be a shift among bitcoin traders in response to the sharp decline in profitability.
• As selling pressure continues on Bitcoin (BTC), analysts expect more downside corrections towards $60,000.

The current condition of Bitcoin’s price being under selling pressure shows that future trading is no longer interesting. The profitability of Bitcoin futures cash and carry trade is falling faster, with little left for traders to squeeze out.

Read more:- Winklevoss Twins Donate Bitcoin To The Donald Trump Campaign.

Cash-and-Carry Trades in Bitcoin

In a sense, this makes the derivative market particularly popular since it involves buying an asset through the spot market while at the same time engaging in its sale via the futures market.

Just a few weeks ago, bitcoin futures merchants got almost risk-free annualized premiums of up to 10% from their cash and carry trades. This implies that there was a difference of 10% between BTC futures and BTC spot prices annually.

However, traders require capital to keep Bitcoin and margin with the futures contracts, which reduces the returns to 5%. Surprisingly, this annualized premium has dropped to 6% or technically 3%, considering the margin costs of holding in the spot markets.

If the annualized returns for the Bitcoin cash-and-carry trade fall below risk-free returns, then it becomes less attractive. Well-known crypto analyst Checkmate points out that there is “enough juice left to squeeze” in Bitcoin as profitability from Bitcoin futures trades becomes unattractive. 

Bitcoin traders may seek alternative options due to unattractive returns relative to risks in Bitcoin futures cash-and-carry trade.

Read more:- BTC Price Needs To Hold $70K Next As Bitcoin Weathers ECB Rate Cut

BTC Price Movement Ahead

It was just recently that analysts were speculating that $60k was a possibility, especially with Bitcoin already correcting over 12% from its June highs. The BTC sell-side risk ratio has reached levels suggesting that a major shift is imminent, according to Bitcoin analyst Checkmate.

He explained that all profits that were planned to be taken have already been taken, just like losses. The Bitcoin analyst added on to say that the Bitcoin market would establish a new price range, thereby igniting emotions such as fear, greed, panic, or euphoria and driving the next phase of market movement.

In the lower time frame, as indicated in the diagram below, the Bitcoin price is currently forming a falling wedge with a higher likelihood of dropping to $60,000.