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Crypto Carry

Author

Listed:
  • Schmeling, Maik
  • Schrimpf, Andreas
  • Todorov, Karamfil

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.

Suggested Citation

  • Schmeling, Maik & Schrimpf, Andreas & Todorov, Karamfil, 2025. "Crypto Carry," CEPR Discussion Papers 20719, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20719
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    File URL: https://cepr.org/publications/DP20719
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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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