Bitcoin Futures Outpace Treasuries in Carry Trade Returns

Recent market data indicates that Bitcoin futures carry trades are now offering superior annualized returns compared to U.S. Treasury bonds. On August 7th, the annualized gross basis for Bitcoin futures contracts ranged from 5.69% to 7.89%, surpassing the 4.19% yield of the two-year Treasury note on the same day.

This shift marks a significant development, as Bitcoin futures basis has historically trailed government debt benchmarks for extended periods. A carry trade strategy typically involves buying an asset at spot price while simultaneously shorting a futures contract to profit from the difference. The annualized return is influenced by the futures premium, contract expiry, and market conditions.

The improved returns in Bitcoin futures are occurring alongside substantial inflows into Bitcoin Exchange-Traded Funds (ETFs), with Wall Street reportedly investing around $850 million. While these trades are often referred to as "riskless," analysts caution that factors such as financing costs, margin requirements, and fees can impact net profitability. The specific parameters used in calculations, including contract choice and roll conventions, can also lead to variations in reported yields.