The launch of the new Bitcoin quarterly contract is always an exciting time. The basis, or lack thereof, points to trader excitement or apathy. As Bitcoin nears $20,000 and with the CBOE and the CME now on board, the basis gyrations of the BitMEX Bitcoin/USD 30 March 2018 futures will fascinate traders.
The leading factor in the basis movements will be the CBOE and more so the CME Bitcoin futures contracts.
The CME contract launches Monday morning Asia time. As a betting man, I predict the basis will move up and to the right in an aggressive fashion. This will carry XBTH18 basis higher as well. Those who cannot trade the CME contract will find that XBTH18 is a great way to play the most anticipated launch of a crypto-related product to date.
Strategy 1: Bullish on price and basis
For those who believe the price and basis will rise together, go long XBTH18. This the highest risk strategy I will propose, but also has the largest profit potential.
Strategy 2: Bullish on price and basis but delta neutral
For those who do not want to run naked Bitcoin delta, go long XBTH18 versus short XBTUSD. You make money on basis expansion via the long XBTH18 position. If the price and futures basis are rising, the XBTUSD swap will also trade at a premium. That means that as a short, you will receive funding.
This strategy is predicated on your view that the price will rise. The FOMO will invite buyers to pay a premium for the 100x leverage. This is what drives the futures basis and swap funding higher.
Strategy 3: Bullish on basis and delta neutral
This strategy is for those who believe that buyers will exert extreme pressure on the CME futures basis but who are not exactly sure whether the price will go up or down.
Traders should go long XBTH18 and short-spot Bitcoin. This trade only makes money if the XBTH18 basis increases.
Timing
Bitcoin moves are exaggerated over weekends when flat cash ceases to travel between exchanges. The FOMO before the CME launch will be legendary, thus it behooves traders to put these trades on as early as possible.
You don’t want to wake up Saturday morning, after a Volar session, to the XBTH18 basis trading a few percentage points higher. The time to buy is now.