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  • LedgerPrime’s crypto quant fund is up 78% thanks to price differences in the spot and derivatives markets. As the crypto market picture turned undoubtedly black in the second quarter. Meanwhile, a $130 million crypto hedge fund run by a Wall Street veteran alleged that they continued trading so well. Therefore, the reason is the price discrepancies in the spot and derivatives markets.

    “Our quant fund is now up 78%, having begun the second quarter at 62%,” LedgerPrime’s chief investment officer, Shilliang Tang, told . “Cash and carry strategies have worked well during this quarter’s sell-off.”

    This is in the opposite situation to bitcoin. Which Bitcoin lost most of its triple-digit year-to-date obtains as it fell to lows below $30,000 on June 22.

    How trading works

    Carry trading, or cash and carry arbitrage, is a market-impartial strategy that makes use of incompetency in the spot and the futures market.

    It merges a long position in the spot market and a short position in futures when the market is in contango. A status where the future prices of an underlying asset are higher than the current spot price.

    As end nears, the premium evaporates. On the day of the agreement the futures price meets with the spot market price, producing relatively riskless returns.

    Carry traders earn money regardless of the market trend. Even though the return is based on how slope is the contango. Bitcoin futures usually offer a substantially higher carry yield than their sentence currency matches, most of which yield less than 5%, according to a JPMorgan report released on April 7.

    The condition was more obvious during the peak of the bull run in mid-April when bitcoin hit a record high above $64,800. On the other hand, increasing the premium on June futures to 25% on the Chicago Mercantile Exchange (CME).

    Carry Strategies

    The quarterly further traded a much bigger premium of around 40% on other non-regulated exchanges such as Binance or Huobi, per data source Skew.

    So, traders could get locked in an annualized profit of 40% in mid-April. They could do it by buying bitcoin in the spot market and selling the quarterly futures contract, which expired Friday.

    Several trading companies worked with carry strategies back then. And also in addition, may got off positions early after the mid-May crash. This can be the catalyst which pushed down June futures premium to less than 10% on considerable exchanges.

    Carry trades carryed out by selling the bitcoin holding and buying back the short futures position or letting it to expire.

    usually, traders loan stablecoins like tether (USDT) to fund the long leg of the strategy. Which it wants to have a bearing on the net yield created by the carry trade.

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