macrocephalopod

I thought the market might be pricing in a significant premium for the basis risk in the arb (given how quickly things might move against you). But the basis in the perps has also been very large

The reverse arb is more constrained cos it can be hard to short. And you can see the cos the basis appears to be even less bound on the downside, which makes sense. I reckon basis mostly a function of: - lopsided end user demand - arb "murkiness"

Here’s a bunch of questions about basis and funding rates that I’d love to have the answers to. 1. Common sense says that futures premiums should be roughly the same as expected funding rates over the lifetime of the future, but historically they have been much lower (so that

short perp/long futures has generally been profitable — why?) 2. Funding rates and premiums can be persistently quite different across different exchanges. What are the main drivers of this? 3. How does options hedger demand affect funding rates and futures premiums? (eg

funding rates for ETH at deribit spiked recently compared to other exchanges — is that because of option hedger activity?)

4. What ultimately constrains funding rates/premiums on the downside? Is it purely demand coming back, or do some players attempt the reverse funding arb?

Another thing not clear (to me.) In the case where there are no limits to arbitrage, do we think the futures should trade at a premium or discount? Do we think the market price in a benefit or cost to holding crypto spot?

just extrapolating from what I've seen on the tradfi insti side – instis would rather have a CME futures position than hold spot BTC with a custodian because there is a tonne of funkiness in the weeds of legal contracts with custodians. So I guess futures should be at a premium