Economic policy journal bitcoin wiki
26 comments
How to earn bitcoin everyday 100% works
This is not investment advice or financial advice of any sort. Do not do this. I do not endorse this and neither I, CryptoFacilities, nor any other entities listed in this site are responsible for any losses. This strategy only works when futures are trading at a premium and for the right type of contract: In this guide we don't want to deal with social loss risk, so use the FCA-regulated, London-based bitcoin derivatives exchange CryptoFacilities.
Sign up here to get started: CryptoFacilities offers Forwards contracts with no socialized losses. Making money arbitraging bitcoin futures can be extremely simple. Futures contracts typically trade at a premium , and all you have to do, starting with USD, is buy bitcoin at Spot price and sell futures of the same amount at premium price. Then just wait until expiration to make your arb profit in bitcoin which you can then put in USD.
Whether it's a weekly, monthly, quarterly, or any futures contract, as long as it's in a premium, you lock in the sale price and earn the arbitrage profit. There's a lot of ins and outs which can get confusing in arbitrage trading. We won't go into the technicals of why futures contracts trade at a premium to spot price. You can read a full explanation here. If it's not of interest to you, all you need to know is that there's a tendency, the further out in time the futures contract expires, for the premium to spot to be higher and higher in nominal percentage terms.
The biggest problem is friction between steps along the way. There's fees, there's time you have to wait which can be eliminated by see-sawing, but then you're not maximizing your capital utilisation , there's slippage in orderbooks, etc. We will go through all of these issues below. I find it best to show by example and then as issues are encountered we will review the concepts underlying. This example is to illustrate all the moving parts and risks that can occur in an arb play.
Another example will follow with a different scenario. You might be thinking, wtf? I thought arbitrage was guaranteed money? Well, in reality there's lots of services facilitating this process which demand fees. Therefore, when you take that into account, you need to wait for the premiums on futures contracts to reach a sufficient level that it makes sense to go through this process. Let's still say it's a Monday and there's a contract expiring 2 weeks from now 11 days to be precise.
These two examples are just a start to illustrate some of the key principles in executing REAL spot derivatives arbitrage trading. Use the bitcoin arbitrage calculator below to see whether your planned arb setup can make money. Spot Price at Sell.