Bitcoin Soars to New Highs as Investors Seek Market-Neutral Profits

Bitcoin Soars to New Highs as Investors Seek Market-Neutral Profits

Bitcoin posted its largest one-day gain since October on Wednesday, reaching a new record high above $64,000. The rally came as investors looked for ways to profit from the growing popularity of bitcoin exchange-traded funds (ETFs) without taking directional bets on the volatile cryptocurrency.

The CoinDesk 20 Index, which tracks the performance of the largest cryptocurrencies, rose 2.5% on Wednesday. Bitcoin, the leading cryptocurrency by market value, jumped 9.5% to $64,729, according to CoinDesk data. The surge was driven by strong demand for the spot-based bitcoin ETFs that debuted in the U.S. earlier this month, allowing investors to gain exposure to the cryptocurrency without holding it directly.


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The ETFs have also created an opportunity for market-neutral arbitrage strategies, which seek to exploit price differences between spot and futures markets. These strategies involve buying bitcoin in the spot market and selling it in the futures market, or vice versa, when futures trade at a premium or discount to spot prices. As futures contracts approach their expiration date, the price gap narrows and the arbitrageur locks in a risk-free profit.

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According to data from blockchain analytics firm Glassnode, the market-neutral bitcoin cash and carry trade currently offers an annualized return of 14%, which is three times higher than the yield on the 10-year U.S. Treasury note, the benchmark risk-free rate. The attractive yield on the cash and carry trade could attract more capital to the crypto market, boosting liquidity and reducing volatility.

Bitcoin has more than doubled in value this year, fueled by increased adoption by institutional and retail investors, as well as speculation that it could become a global reserve currency. However, the cryptocurrency remains highly volatile and faces regulatory and environmental challenges.

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