Large returns on cash taking advantage of bitcoin's contango

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Mark Leavy
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by Mark Leavy » Wed Mar 10, 2021 8:03 pm

vincent_c wrote:
Wed Mar 10, 2021 7:38 pm
Mark Leavy wrote:
Wed Mar 10, 2021 6:45 pm
Do you mind sharing which ETF? I looked at doing this with GBTC and the tracking error could easily wipe out the profits.
<Excellent write up>

Thank you!

In poking around, I assumed that you were using BTCC. I just changed my IBKR profile to allow me to purchase on the Toronto exchange. I'm still not committed, but my account has enough cash to cover the futures. It could be a fun experiment if I am comfortable with the ETF tracking.

Thanks again.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by vincent_c » Wed Mar 10, 2021 9:46 pm

Glad I could help!

Some things to add.

You need to be comfortable in holding 5BTC worth of stablecoins. I have yield farmed before but not on this amount of money.

In order to reduce risk, I have split up the yield farming in DAI, USDC, and USDT. You can earn additional sometimes double digit APY on this amount.

Since you also have to hold the BTC ETF, the overall return on capital is actually cut in half.

Yield farming is not without risk hence I would not add the additional return to the calculation. Instead you can think of yield farming almost like investing in a short term junk bond.

I understand that at this point anyone considering this is thinking it’s probably not worth it. In order to on board 5 BTC to just facilitate the arbitrage is not worth the risk potentially unless you happen to have 5BTC to play with.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by Mark Leavy » Thu Mar 11, 2021 10:17 pm

Just to close this topic out for me...

It looks like there is no way for me (as a US resident) to buy BTCC fully aboveboard. Despite everything I tried, it is restricted.

So... I will put this trade on hold until it becomes possible for a US resident to own a long position that accurately tracks bitcoin in a reputable brokerage that will also hold a short futures position. But... I expect that the arbitrage opportunity will quickly disappear when that happens.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by vincent_c » Thu Mar 11, 2021 11:33 pm

Also to further add and close out

Since BTCC has different trading hours than BRR futures then you really have some risk of a flash crash happening after hours on the futures market if not fully funded.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by bitcoininthevp » Fri Mar 12, 2021 4:44 am

Ledgerx (https://www.ledgerx.com/) could be a good option if you are in the US. Small contract sizes, regulated, and has futures.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by vincent_c » Fri Mar 12, 2021 7:16 am

https://www.ledgerx.com/custody-and-insurance

For small amounts of play money, there are many other ways to YOLO it around.

For anyone looking for arbitrage, ledgerx and the CME group are not comparable in my opinion. We should be careful when even suggesting people look into these other smaller crypto exchanges.

However, it does help explain why the arbitrage exists.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by bitcoininthevp » Fri Mar 12, 2021 10:54 am

vincent_c wrote:
Fri Mar 12, 2021 7:16 am
https://www.ledgerx.com/custody-and-insurance

For small amounts of play money, there are many other ways to YOLO it around.

For anyone looking for arbitrage, ledgerx and the CME group are not comparable in my opinion. We should be careful when even suggesting people look into these other smaller crypto exchanges.

However, it does help explain why the arbitrage exists.
LedgerX is CFTC certified:

- Designated Contract Market (DCM)
- Derivatives Clearing Organization (DCO)
- Swap Execution Facility (SEF)

And has been around many years.

It is also insured and uses a custodian that’s also insured and stores billions for almost a decade.

Clearly its no CME, that goes without saying. But definitely not some fly by night crypto exchange to YOLO DOT, ADA, and ATOM on.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by vincent_c » Fri Mar 12, 2021 11:44 am

bitcoininthevp wrote:
Fri Mar 12, 2021 10:54 am
And has been around many years.
Since 2017 apparently so our definition of many years is different.

What people need to know is that if you purchase a futures contract, your counterparty is the exchange. Their insurance is potentially inadequate which is why I linked that page. It personally wouldn't be worth it for me in any small amount and for large amounts I would feel like the risks aren't worth it.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by bitcoininthevp » Fri Mar 12, 2021 12:34 pm

vincent_c wrote:
Fri Mar 12, 2021 11:44 am
bitcoininthevp wrote:
Fri Mar 12, 2021 10:54 am
And has been around many years.
Since 2017 apparently so our definition of many years is different.

What people need to know is that if you purchase a futures contract, your counterparty is the exchange. Their insurance is potentially inadequate which is why I linked that page. It personally wouldn't be worth it for me in any small amount and for large amounts I would feel like the risks aren't worth it.
Sure, for bigger amounts we discussed, CME.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by Mark Leavy » Fri Apr 02, 2021 7:12 pm

CallumHurst wrote:
Fri Apr 02, 2021 5:54 am
Thanks for the suggestion. Keep contributing.
You've made a few posts on this forum. Kudos to whoever wrote you. You seem like a well written bot.

I can't remember, was Turing Irish or Australian?

Thanks,
Mark
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