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Thanks to the growing discrepancy between the rates for Bitcoin's perpetual futures and its current market price, many traders are reviving interest in Bitcoin arbitrage strategies. These strategies gained significant traction during past upswings in the cryptocurrency market.
The present focus is on the funding rates, which are essentially the expenses associated with maintaining both long and short stances in perpetual futures, sometimes termed as "perp premium". This rate has recently skyrocketed beyond a yearly rate of 10% on some of the leading platforms like Binance. These figures are backed by the insights shared by Velo Data. A positive trend in funding rates indicates that those purchasing, known as longs, are compensating those selling to maintain their optimistic leveraged positions.
For traders, there's a strategy that's gaining attention. By concurrently selling perpetual futures and purchasing the cryptocurrency on the immediate market, they can initiate a funding fee arbitrage. They can confidently earn the 10% funding, all the while sidestepping any hazards associated with ongoing price surges.
According to Markus Thielen, who is in charge of research and strategy at Matrixport, a crypto service company, the current market presents lucrative arbitrage opportunities. He observed that even though the annualized perp premium for Bitcoin reduced from 40% to 13% in just one day, it still offers a favorable ground for such trade practices.
A surge in the perp premium aligns well with previous upward movements. The past month has seen Bitcoin's value increase by a quarter, with the major part of this growth being observed during the trading hours in North America.
After the noted trends, Bitcoin achieved another milestone, reaching its highest value for 2023 at $35,000. Accompanying this surge, altcoins, or alternative cryptocurrencies to Bitcoin, are also experiencing a similar upward momentum.
Many in the financial sector are speculating that the excitement surrounding Bitcoin ETFs (Exchange Traded Funds) and the participation of BlackRock, a major global investment firm, are key factors driving this remarkable rally in Bitcoin's value.
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