Crypto Trader Daily – 25 March 2015

Price Action

Intraday price volatility spiked as the the price crashed to $235 on Bitfinex. Minutes later a violent short squeeze sent the price back to $250. The downtrend is still in effect, but the violent squeezes are a warning for shorts not to get too greedy. Expect a retest of the $235 lows and ultimately $230.


Trade Idea

Sell XBUH15 above $245 with a downside target price of $235. Cover the position if the price trades above $255.


In the News

Hong Kong to leave Bitcoin unregulated (CoinTelegraph)

Neteller adds Bitcoin deposit option (CoinDesk)

Crypto Trader Digest – 16 March 2015

Price Action

The price busted through $290 in early morning Asia trading. $300 looms close in the horizon, but it takes great patience to restrain oneself from FOMO buying this rally. If you did not establish a long position in the $280s, wait for a slight pullback and begin accumulating a long position.


Trade Idea

Use XBUH15 to establish a long position below $280. Near term target price is $300. Expect it to be breached by mid week.


In the News

Victorian government to sell A$9.3 million worth of Bitcoin (SMH)

Overstock buys US broker dealer to help advance Medici exchange (Coinsetter)

Wiper aids Bitcoin and gets banned in China (Techcrunch)

Crypto Trader Daily – 12 March 2015

Price Action

$290 fell, and the price briefly touched $286 on Bitfinex. The price has settled back above $290, but is poised to take another leg down. $280-$285 looks likely before another run can be made above $300.


Trade Idea

Increase your portfolio’s short exposure above $290 with a target price of $280-$285. If $280 is breached, consider this bull run over. Use XBUH15.


In the News

IBM believes they can develop a better Bitcoin (CoinDesk)

Contact Charlie Shrem in the slammer (Charlie Shrem)



Crypto Trader Daily – 12 March 2013

Price Action

The fade has begun. $300 couldn’t be topped today, and the price is drifting towards $290. It seems the rally has lost steam, and consolidation will occur below $290.


Trade Idea

Take a short position above $290 with a target price between $280-$285. Use XBUH15.


In the News

Cumberland Mining believed to be a winner in latest US Marshals auction (Qntra)

Bitcoin Investment Trust audited financial reports (OTC Markets)

Bter to return hacked funds (Coindesk)

Crypto Trader Daily – 11 March 2015

Price Action

Bitcoin made another push over $300 early morning China time. The price subsequently fell back to $290, and is now gathering strength to punch through $300 again. The sentiment has turned quite bullish after the announcement that derivatives goddess Blythe Masters has joined a Bitcoin startup.


Trade Idea

Continue to increase your portfolio’s long position below $300. Look for a gap upwards during the early morning hours China time. Consider taking profit at $315. Use XBUH15.


In the News

Ex-JP Morgan head of Commodities Blythe Masters joins Bitcoin startup (Business Insider)

itBit revealed as one of the US Marshals Bitcoin auction winners (CoinDesk)

Crypto Trader Daily – 6 March 2015

Price Action

A violent short squeeze was successfully executed early morning China time today. The price shot from under $270 to $285 on Bitfinex. The fade was strong, and the price has tip toed back down to $270-$275. The bullish momentum could not hold the rally, expect the price to test $260 in the coming days.


Trade Idea

Establish short positions above $270, with a $260 price target. Trade the quarterly futures contract XBUH15.


In the News

Third US Marshals auction attracts more bidders (CoinDesk)

GAW Miners under US regulatory scrutiny (Coinfire)

Future vs. Future Arbitrage With The XBU Chain

Arbitrage between different futures contracts with similar underlyings and payoff structures can be a very profitable trading strategy. The most common futures contract structure in Bitcoin is worth a fixed amount of USD and pays out in Bitcoin. BitMEX, OKCoin, BitVC, and ICBIT all have futures contracts using this structure.

BitMEX offers a XBU chain where each contract is worth $100 in Bitcoin, and quoted in USD. As the spot Bitcoin (XBT) / USD exchange rate moves up and down the contract’s worth stays fixed at $100. If you are long the contract, as the XBT/USD price rises the contract is worth less and less XBT; as the XBT/USD price falls the contract is worth more and more XBT.

The goal is to find two futures contracts that have similar structures. The below table lists the relevant details on the two contracts.

Exchange BitMEX OKCoin
Futures Contract XBUH15 BTC0327
Underlying XBT/USD XBT/USD
Multiplier $100 $100
Expiry Date 27 March 2014 27 March 2014
Expiry Time 10:00 UTC – 12:00 UTC TWAP on Bitfinex 08:00 UTC BTC/USD Index (an OKCoin constructed index)
Clearing Method Central Clearing Socialised Losses

The similar payout structure and expiry dates make these two contracts good candidates for arbitrage.

For the following example assume the following:

  1. The Bitcoin price on Bitfinex and the OKCoin BTC/USD Index is $395 and $392 respectively
  2. XBUH15 and BTC0327 are trading at $405 and $395 respectively.

The two contracts trade on different indices so to evaluate the arbitrage potential let’s look at the basis on each contract. Basis = Futures Price – Spot Price.

Futures Contract XBUH15 BTC0327
Futures Price $405 $395
Underlying Spot Price $400 $387
Basis $5 $8

XBUH15’s price is greater than BTC0327’s; selling XBUH15 and buying BTC0327 will yield a profit. But how much? The price differential is $10; however, BTC0327 uses a different settlement index than XBUH15 for which needs to be considered. Because we are selling XBUH15 we receive the basis or +$5, and we pay the basis or -$8 on the purchase of BTC0327. The total expected profit is $10 + $5 – $8 = $7.

At 08:00 UTC on 27 March 2015 the long BTC0327 contracts will expire. The long exposure the contract generated is now gone. From 08:00 UTC to 12:00 UTC, you are short XBT/USD because you sold XBUH15 contracts. For those four hours, you can either buy Bitcoin on Bitfinex and sell during the TWAP settlement period or run the short exposure until the XBUH15 contracts expire. Depending on the execution slippage and market movement the expected $7 profit may be higher or lower.