Forums  > Pricing & Modelling  > Bitcoin futures pricing  
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Total Posts: 50
Joined: Feb 2019
Posted: 2021-05-22 09:26

I have been trying to figure out a little bit of the pricing of BTCUSDT futures. I have directed my attention towards Binance quarterly USD-margined futures specifically, and I assume that Binance is more or less a closed system. This because from what I can see, borrowing platforms look like they require very high collateral to be posted to borrow, if you wish to have full control of the borrowed funds and be able to transfer them out from the platform.

I thought BTCUSDT futures would behave similarly to currency forwards, and therefore I have been comparing daily implied yield to expiry from futures to daily interest rate diff between BTC and USDT (Binance lending/margin rates), with the hypothesis that the daily implied yield to expiry should revert toward daily interest rate diff.

However, this doesn't seem to hold when looking at the data. Daily interest rate shifts seem to have little if any explanatory power on yield shifts, spot returns have a much higher explanatory power from what I can see.

I have also thought about doing a basis trade using perpetual futures instead of the actual underlying, thus financing via funding rate, but have had a hard time coming up with a reasonable way to price the future for this case. Any input appreciated.

Nous promettons selon nos espérances, et nous tenons selon nos craintes.


Total Posts: 1377
Joined: Jun 2005
Posted: 2021-06-14 06:50
Conventional market has nearly unique source of money supply - dollar. Crypto market has either many or none. Your own futures pricing depends on your own funding source (can be even in dollars or completely in btc).

The rest is just benchmarking to factors, like funding, options (put call parity) or even hash rate (in some way).

Cannot say about Binance, but I have seen dependency on funding at Deribit. 5 min bars is ok.

... What is a man
If his chief good and market of his time
Be but to sleep and feed? (c)

Its Grisha

Total Posts: 92
Joined: Nov 2019
Posted: 2021-06-14 12:55
You will find that the futures funding (both perps and vanilla) is more or less a function of sentiment, hence the dependence on spot returns. In bull markets, leveraged long demand is much higher than the amount of USD people are willing to lend for the purchase of crypto, so the annualized futures basis starts to balloon.

>the hypothesis that the daily implied yield to expiry should revert toward daily interest rate diff

This sounds like it could make sense, but maybe dealing with a time horizon mismatch. If it's anything like the 1 hour FTX lending/borrow rates, they are super volatile vs the futures basis right? So might be more a function of instantaneous demand shocks while the future is pricing in the long run expectation.

"Nothing is more dangerous to the adventurous spirit within a man than a secure future."
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