Cryptocurrency Derivatives Series: Take a Glance at Bitcoin on Coinbase and Bitcoin Futures (BTCV9) on CME

The competition between digital currencies at the crypto-exchanges, and the derivatives products of decentralized digital currencies at the contemporary exchanges like CME is now underway.

Please be noted that the price difference as shown in the technical charts, BTCUSD at Coinbase exchange is available at $8,000 levels (while articulating). Whereas, CME BTC Futures of front-end month contracts are trading at $8,050 level, with dip about $130 from the previous settlement.

Thereby, we intend to exploit price differentials between Coinbase and CME and bet upon arbitrage opportunity.

Hence, by buying 5 bitcoins in the former and initiating 1 lot of short on the CME BTCV9 futures contract at the current level. 

Well, out of this trade idea,  we can “carry” the 5 bitcoins for cash settlement at the expiration date for the futures contract. The BTCV9 price is subject to the contract of 1-month tenor which is the cost of carry in addition to the other factors involved as well.

Please also be noted that the margins are to be maintained by the exchange based on volatility of the bitcoin price. 

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