Institutions Quietly Extract Cash from XRP Traders Through Carry Trades

Bitwise Asset Management has revealed an interesting insight into institutional trading habits in the cryptocurrency market. The company's Crypto Carry Fund, or USCC, has been utilizing a strategy known as a carry trade to extract cash from traders.

The fund paired XRP held in custody with a short position in September Coinbase XRP futures, resulting in a 14.57% implied-yield label. This means that the fund was positioning itself to collect the premium between futures and spot prices, which stood at around 0.91%.

The carry trade strategy involves buying an asset and selling a future trading above it, with the goal of locking in the premium when the position is settled. In this case, the USCC held approximately 97.48% of its XRP quantity as a hedge against any potential directional move in the market.

While this specific example only accounts for one private fund, it provides insight into how institutions are quietly extracting cash from traders through carry trades. The report also highlights the importance of understanding the nuances of institutional trading habits and the risks associated with these strategies.