Bitcoin Futures Basis and DeFi Borrowing Costs in Changing Markets
Summary
This market update explains how optimism around a July 2024 event coincided with a sharp increase in Bitcoin's front-month futures basis. The basis compares futures prices with spot and can support a delta-neutral cash-and-carry position: buy BTC in the spot market and short futures. The commentary says the annualized basis rose above 40% before settling near 8%, while higher basis and increased perpetual funding rates raised the cost of short-term cash. These figures illustrate market conditions at the time, rather than a durable return expectation.
The report also covers Aave's reduction of optimal stablecoin borrowing rates in response to changes in Maker's Dai Savings Rate and related yield arbitrage. It describes rising USDC liquidity and utilization on Aave, growth in a tokenized Treasury fund, and lower Ethena yields as funding rates moderated. The update connects these developments to shifting market incentives, but provides no independent causal test or trading strategy; its observations are specific to the period covered.
Key ideas
- A higher Bitcoin futures basis can make a spot-and-short-futures cash-and-carry position more attractive.
- Rising perpetual funding rates can add to short-term cash costs when market positioning becomes imbalanced.
- Aave adjusted stablecoin borrowing rates in response to lower external yields and changing arbitrage incentives.
- USDC liquidity and utilization on Aave both increased during July, indicating substantial borrowing activity.
- Ethena yields declined alongside lower funding rates, reflecting the strategy's sensitivity to perpetual market conditions.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.