"ETF issuer Defiance has filed with the U.S. Securities and Exchange Commission to launch two exchange-traded funds built around the so-called basis trade-one tied to Bitcoin, the other to Ether. A crypto staple for years, the strategy seeks to profit from the price gap between spot markets and futures contracts. Investors buy the token, sell the futures, pocket the difference, and repeat, seeking to generate consistent yield from the spread while being generally insulated from outsize price swings."
"Once reserved for fast-moving hedge funds and crypto-native desks, the basis trade has become more common-and more crowded. Offering it to a fresh crowd of retail investors could potentially reduce returns and introduce risks that are easy to overlook, including trading costs. The trade tends to be lucrative in a bull market where premiums on futures contracts are high. Crypto traders raked in hefty profits last January amid soaring Bitcoin prices around the expectation that Bitcoin ETFs would be launched. Premiums over futures contracts rose as high as around 20% during that period."
Defiance has filed to launch two ETFs, NBIT for Bitcoin and DETH for Ether, built around the basis trade. The strategy profits from price gaps between spot markets and futures contracts by buying the token, selling the futures, and collecting the spread. The Bitcoin ETF would hold a fund like BlackRock's IBIT and short CME Bitcoin futures to capture expected returns driven by volatility and demand dynamics. Packaging the strategy into a single-click ETF brings retail access to an institutional arbitrage but may crowd the trade, compress returns, and introduce overlooked risks such as trading costs.
Read at Fortune Crypto
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