Bitcoin Price Drops to $50K, Frustrating Carry Traders

Bitcoin’s (BTC) recent price crash has narrowed the spread between futures and spot prices, reducing the appeal of carry trades that seek to profit from discrepancies between the two markets.

The leading cryptocurrency by market value fell by over 18% in 24 hours to $50,000, hitting its lowest level since February 2024. The sell-off, part of risk aversion in global markets, is likely due to the sharp change in the Japanese yen and the US bond market.

According to Velo Data, leading crypto exchange Binance’s annualized three-month futures premium has fallen to 3.32%, the lowest level since April 2023. Crypto exchanges OKX and Deribit are also seeing a similar decline in their futures premiums.

Futures on the regulated Chicago Mercantile Exchange, which is often favored by institutions, now trade at roughly the same levels as spot prices.

This means that the return on a cash-and-carry strategy that involves a long position in the spot market or in U.S.-listed ETFs and simultaneously selling futures is currently less than the yield on the 10-year U.S. Treasury note.

The strategy was quite popular among institutions in the first quarter, when futures were trading at a premium of over 20% and were assumed to account for a significant share of inflows into spot ETFs.