Bitcoin Surge Causes Traders to Earn Big with Smart Arbitrage Strategy

For the first time since April 2022, Bitcoin (BTC) has soared past $41,000, which has led to excitement among traders. This rally has given high hopes to those betting on Bitcoin's price direction while offering opportunities for market-neutral traders.

TheBitcoin cash and carry arbitrage strategy is now yielding at least a 10% annualized return. It is a  market-neutral approach that helps traders profit from the price differences between the spot market and futures contracts.

Here’s how traders use this strategy: These traders buy Bitcoin in the spot market and sell futures contracts when they are priced higher. This tactic ensures a fixed return as the futures price eventually aligns with the spot price at the contract's expiry, regardless of market trends.

Futures contracts are currently trading at an 8% to 12% annualized premium, they offer traders a potential return in this range, excluding trading costs. According to crypto quant researcher Samneet Chepal, this strategy is showing signs of comeback, with the futures premium around 10%.

The returns from this arbitrage strategy have proved to be higher than the U.S. 10-year Treasury note's 4.2% yield. Although the spread isn’t as wide as in early 2021, it could increase if Bitcoin's bull run continues.

Several factors contribute to the current rise in Bitcoin’s price, including excitement for an upcoming ETF decision, easing concerns over Binance's legal issues, geopolitical tensions, and growing institutional interest, says Deribit's Chief Commercial Officer Luuk Strijers. The futures basis rising beyond 10% is a strong indicator of positive market sentiment.