This isn't how a cash and carry trade works (Pixabay).
Institutional demand for stablecoins may cool because yield on “carry trades” has been cut in half since Monday.
The annualized rolling one-month futures basis shot as high as 28% at the start of the week on the Malta-based cryptocurrency exchange OKEx, the biggest in terms of open interest. That was the highest premium since February, according to data provided by the crypto derivatives research firm .
That premium, however, dropped to 14% in under 48 hours. In other words, the carry strategy, if initiated now and held until next Friday, will yield an annualized return of 14%, down from 28% on Monday.
Carry trading, or cash and carry arbitrage, is a market-neutral strategy, one that seeks to profit from both increasing and decreasing prices in one or more markets. It involves buying the asset in the spot market and simultaneously selling a futures contract against it when the futures contract is trading at a premium to the spot price.