4 Pages Posted: 3 Feb 2021
Date Written: January 27, 2021
We study carry trades in the cryptocurrency market and document that the lack of sufficient arbitrage capital in combination with highly levered speculators creates ample carry opportunities. We find that carry in bitcoin, as measured by the funding rate of BTC/USD perpetual swaps, resembles components of a fear-and-greed index and past returns. Carry in perpetual swaps positively predicts returns in the time-series of BTC/USD and in a cross-section of 51 cryptocurrencies.
Keywords: Bitcoin, Cryptocurrencies, Carry, Momentum
JEL Classification: F31, G10, G11, G12, G15
Suggested Citation: Suggested Citation