Institutional Cryptocurrency Basis Trading and Futures Spread Strategies
Summary
The document introduces basis trading in cryptocurrency futures, where traders seek to profit from differences between futures and spot prices or between futures contracts. It describes the approach as useful for arbitrage and hedging, and notes that leverage can also be involved. The report focuses on Bitcoin and Ethereum, describing elevated annualized basis early in 2024 and an increase in futures spread activity after basis rose further in mid-February.
Client examples cover cash-and-carry trading, perpetual swap funding rate arbitrage, and providing liquidity in spread markets. They emphasize coordinating the legs of a spread while limiting slippage and risk, and managing positions across contract expirations. The document also reports that a trading venue designed for spreads saw rising execution activity and nearly 5 billion USDT in volume in March 2024. These figures are attributed to Laevitas as of April 1, 2024. The material summarizes a report and selected client experiences; it does not provide enough detail to assess strategy returns, risk-adjusted performance, or whether the observed market conditions persist.
Key ideas
- Basis is the difference between a futures price and its underlying spot price.
- Institutional traders can use basis strategies to seek arbitrage opportunities or hedge exposure.
- Cash-and-carry and perpetual swap funding rate arbitrage are examples of strategies discussed.
- Spread execution requires managing slippage and risk across multiple contract legs.
- The reported rise in spread activity reflects a specific market period and does not establish future performance.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.