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Author: Admin | 2025-04-27
Funding rate is the longs paying the shorts (because more capital is naturally going to be long bitcoin, especially when the price is going up).So, if you want to go leverage long for an extended amount of time, and the perpetual swap funding rate is high, then you’re much better off going leverage long on a futures contract that may only be trading at a 23 percent annualized premium.But again, just like the swap market, not many investors want to leverage short-forward futures contracts. A large portion of the capital that is short bitcoin is likely doing the basis arbitrage trade.What Are The Implications?It’s possible that bitcoin’s contango has created a super massive black hole.The Ever-Growing Bitcoin Black Hole:Bitcoin is the world’s best monetary good designed to go up foreverMarket participants buy and the price goes upPrice going up attracts more buyers (with leverage)Leverage buyers drive up the contango spreadUSD arbitrageurs attempt to capture the risk-free returnTo capture the spread, they buy bitcoin and sell futuresBuying bitcoin causes the price to go up furtherPrice going up increases the contango spread, attracting more arbitrageursInvestor recognize this feedback loop exists and just buy bitcoin to HODLRepeat for all market participants until hyperbitcoinization?Why Has This Not Been Arbitraged Out?The bitcoin contango basis trade is adding gas to the fire. As more and more capital begins to recognize this opportunity, the price of bitcoin will continue to increase.There are a few possible explanations for why this spread hasn’t been arbitraged out. Since a truly
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