Crypto Carry

Maik Schmeling, Andreas Schrimpf and Karamfil Todorov

No 20719, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We analyze the dynamics of carry in crypto markets — the difference between futures and spot prices — and document that it can reach exceptionally high levels, sometimes exceeding 40% per annum, with significant variation over time. This phenomenon reflects a substantial and volatile inconvenience yield associated with holding spot cryptocurrencies relative to futures. We trace the large and volatile crypto carry to the interplay of two main forces: (i) demand from smaller, trend-chasing investors seeking leveraged exposure, and (ii) the limited deployment of arbitrage capital due to regulatory and margin frictions. Our findings highlight how structural limits to arbitrage — especially severe in the case of crypto — can amplify price inefficiencies across financial markets, offering lessons for understanding asset pricing and market behavior more generally.

Keywords: Carry; Bitcoin (search for similar items in EconPapers)
JEL-codes: G12 G13 G15 (search for similar items in EconPapers)
Date: 2025-10
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