Visualizing the Bitmex Arbitrage

2018年12月13日

A handy trick for visualizing the arbitrage opportunity between Bitmex quarterly futures and spot is to input the equasion (XBTZ18-XBTUSD)/XBTUSD*100 into Tradingview. (You can substitute XBTZ18 for another quarterly symbol). I believe all account types can view this on the Daily resolution.

Unfortunately historic data for all past quarterly futures contracts are not available for comparison but in the past the spread has become quite large and attractive for a "Cash and Carry" trade. At the high of 2017 the quarterly futures traded at an extreme of 21% premium.

Shorting the quarterly futures when there is a positive premium at 1:1 leverage creates a virtual "stablecoin". If the value of Bitcoin goes up the short position goes down but at the same rate thus the nominal value of holdings remains the same. The inverse is true in a bearish market. As expiration approaches the two instruments will come to settle at parity meaning the premium received when the trade was entered will be realized. Not accounting for exchange default this is essentially a riskless trade.

The risk profile does NOT work to the upside as if one is in a long futures position not only does the trade lose value but also the value of Bitcoin itself; losses are compounded. This trade is best used as a hedge and situational arbitrage.