Large returns on cash taking advantage of bitcoin's contango

Discussion of the Cash portion of the Permanent Portfolio

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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 6:38 pm

bitcoininthevp wrote:
Wed Mar 10, 2021 6:24 pm
If 5 BTC is the minimum and that too big and you can’t portfolio margin or find a broker or another exchange that will help then I guess it won’t work for you.
Portfolio Margin only works if you can hold the long and the short in the same portfolio. I haven't seen a way to do that in the USA.
And, to be clear, I wouldn't have any issue with the trade if you could do it this way. I would probably try it.
Last edited by Mark Leavy on Wed Mar 10, 2021 6:40 pm, edited 1 time in total.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by bitcoininthevp » Wed Mar 10, 2021 6:40 pm

The trade remains a risk free arbitrage. Just because your current jurisdiction and exchanges rules make it hard for you doesn’t change the fundamentals here. There are other venues with other requirements or better flexibility.

Maybe this is part the reason the trade remains.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by bitcoininthevp » Wed Mar 10, 2021 6:41 pm

Mark Leavy wrote:
Wed Mar 10, 2021 6:38 pm
bitcoininthevp wrote:
Wed Mar 10, 2021 6:24 pm
If 5 BTC is the minimum and that too big and you can’t portfolio margin or find a broker or another exchange that will help then I guess it won’t work for you.
Portfolio Margin only works if you can hold the long and the short in the same portfolio. I haven't seen a way to do that in the USA.
And, to be clear, I wouldn't have any issue with the trade if you could do it this way. I would probably try it.
I think there are some brokers on the CME and bakkt that provide a way of margining this sort of thing.
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Re: Large returns on cash taking advantage of bitcoin's contango

Post by Mark Leavy » Wed Mar 10, 2021 6:45 pm

vincent_c wrote:
Wed Mar 10, 2021 6:40 pm
Mark Leavy wrote:
Wed Mar 10, 2021 6:38 pm
bitcoininthevp wrote:
Wed Mar 10, 2021 6:24 pm
If 5 BTC is the minimum and that too big and you can’t portfolio margin or find a broker or another exchange that will help then I guess it won’t work for you.
Portfolio Margin only works if you can hold the long and the short in the same portfolio. I haven't seen a way to do that in the USA.
Mark, have you read how I am doing this
No, I saw your reference to using futures for a synthetic PP, but I didn't connect the dots to the bitcoin arbitrage.

Edit: Okay, I went back and read your posts and it appears that you are taking a long position with a bitcoin ETF and then shorting a BRR future. Do you mind sharing which ETF? I looked at doing this with GBTC and the tracking error could easily wipe out the profits.
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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 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 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 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 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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