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Bitcoin Logs Biggest Single-Day Gain Since October, Market-Neutral Bets Yield 3x U.S. Treasury Notes
The attractive yield on the market-neutral cash and carry trade could draw more money to the crypto market.
Updated Mar 8, 2024, 10:23 p.m. Published Feb 29, 2024, 5:46 a.m.
- Bitcoin rose 9.5% Wednesday, extending the two-day winning streak.
- Analysts foresee a continued move higher into six figures in the coming months.
- The market-neutral bitcoin cash and carry offers 14% annualized return, according to Glassnode.
Bitcoin surged 9.5% on Wednesday, registering its biggest single-day percentage gain since Oct. 23, according to charting platform TradingView.
Prices rose to $64,000 on several exchanges, reaching the highest since November 2021. The parabolic move from Monday’s low of near $51,500 has been widely attributed to Wall Street’s embrace of the spot-based bitcoin ETFs. The CoinDesk 20 Index, the broader market gauge, has risen over 10% this week.
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The consensus is that the rally will continue in the coming months, taking prices into six figures.
“Our analysis forecasts a conservative price objective of $100,000-$120,000 to be achieved by Q4 2024, and the cycle peak to be achieved sometime in 2025 in terms of total crypto market capitalization,” analysts at crypto exchange Bitfinex said.
“The ETFs have introduced ‘passive demand’ which means demand is coming from investors that is largely price agnostic. They perceive bitcoin as a store of value rather than a tradable volatile asset, which has been the case for several years before the introduction of the ETFs,” analysts added.
Early this week, technical analysis pundit Peter Brandt said bitcoin could peak at $200,000 by September 2025.
These forecasts are sure to cheer directional traders. That said, non-directional traders need not feel left out, as the cash and carry arbitrage now yields three times more than the yield on the 10-year U.S. Treasury note, the so-called risk-free rate.
Cash and carry arbitrage is a market-neutral strategy that seeks to profit from price discrepancies in spot and futures markets. The arbitrageur combines a long position in the spot market with a short position in futures when futures trade at a premium to spot prices. As futures expiry nears, the premium evaporates, and on the day of the settlement, futures converge with spot prices, generating a relatively risk-less return to the arbitrageur.
Per blockchain analytics firm Glassnode, the bitcoin cash and carry strategy, involving three-month futures, yields over 14%. That’s more than three times the 10-year Treasury yield of 4.27% and 2.8 times the 1-year Treasury yield of 5%.
The relatively higher yield could attract more money to the crypto market.
“The yield available in futures markets is likely to start attracting market makers back into the digital asset space, deepening market liquidity,” Glassnode said in the weekly newsletter.
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