Bitcoin almost hit the $20,000 mark this week and the mania around the cryptocurrency is creating a market inefficiency.
This in turn offers interesting trade setups for traders, who can capitalize on the immature market movements.
According to Bloomberg and its data, the Bitcoin Investment Trust (a publicly traded vehicle) trades at more than double the value of its Bitcoin share at $1,601. Bloomberg continues to explain that “a savvy trader could in theory mint money by betting that gap will shrink. Futures contracts introduced over the past week by Cboe Global Markets Inc. and CME Group Inc. provides a way to do that: Buy the futures, short sell the Bitcoin Investment Trust.”
What does this mean? Short sellers can capitalize on the market inefficiency by going short on the fund but long on the Bitcoin futures. Andrew Left from Citron Research explains his trade setup in detail via the video below, which seems to capture 60-80% profit with little to no risk.
According to Left, the gap between the trust’s price and holdings “has to do with investors out there that do not know what they’re doing” who also added that the “current challenge for investors interested in shorting the trust is finding shares to borrow.”
Wish you good trading,