Crypto Carry

4 Pages Posted: 3 Feb 2021

See all articles by Friedrich-Carl Franz

Friedrich-Carl Franz

Goethe University Frankfurt - Department of Finance

Maik Schmeling

Goethe University Frankfurt - Department of Finance; Centre for Economic Policy Research (CEPR)

Date Written: January 27, 2021

Abstract

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

Franz, Friedrich-Carl and Schmeling, Maik, Crypto Carry (January 27, 2021). Available at SSRN: https://ssrn.com/abstract=3774118 or http://dx.doi.org/10.2139/ssrn.3774118

Friedrich-Carl Franz (Contact Author)

Goethe University Frankfurt - Department of Finance ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60323
Germany

Maik Schmeling

Goethe University Frankfurt - Department of Finance ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60323
Germany

HOME PAGE: http://sites.google.com/site/maikschmeling/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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