What does a negative GBTC premium mean (what is a premium transaction like)
gbtc premium negative indicates what after Bitcoin has been halved, the current currencies are “BTC/BNB” and “ETH/BSV”. But it is still a very unstable thing for btc (especially Ethereum). So we see that this situation will continue until May 2020 According to CoinMarketCap’s data analysis, it can be found that in January 2019, the daily average trading volume of BTC reached $200 million. In the past few months, BTC has been continuously declining every day – it has now reached nearly 100% market share. Therefore, we believe that there are three reasons why the BTC premium is negative:
1) Low market share 2) Price fluctuations are severe, but there is still room for arbitrage
3) Investors need more capital to buy more Cryptocurrency because they are worried about investment risks. (Note: Due to the price decline of mainstream digital assets such as BCH and ETH)
What is premium trading?
What is premium trading?
This article will analyze two situations in the market to better understand why this phenomenon occurs
1. Buyers in the Spot market usually get higher prices and lower prices, which makes it easier for buyers to make profits
2. If a seller has a high demand for the price of a specific asset (such as Bitcoin), it can immediately start selling or holding the Cryptocurrency, but when these prices are closed, the seller cannot withdraw funds from the exchange For those who hope to achieve profits through leverage, arbitrage trading is an effective method because it eliminates potential price manipulation and provides additional protective measures. Due to the lack of any substantial risk in arbitrage trading, they must bear significant losses If both exchanges experience the same situation, then premium trading becomes possible. This means that both buyers and sellers are purchasing the same number of tokens for the same cryptocurrency, but if there is a similar premium at different time periods, they will also trade If the liquidity and trading volume of the exchange exceed expectations, premium trading becomes a reality 5. Premium trading is similar to futures contracts. However, when investors are willing to pay a higher price for another derivative product than before, traders always try to increase their order volume to obtain higher returns As more and more users participate in the encryption market, more and more people are looking for new alternative ways to earn more money
7. In order to allow more users to enter the encryption industry, the exchange should create a new trading mechanism: that is, provide higher quotations to Market maker, and then calculate the profit rate according to the premium. This process takes a long time to complete, so only the optimal strategy is feasible Most transactions conducted on over-the-counter trading platforms are conducted above the matching costs of the platform. This is determined by the short seller Once the trading volume of the exchange exceeds the total market value, short sellers can liquidate their positions, thereby reducing costs There are currently two types of trading mechanisms in the market – arbitrage trading and spot exchange trading. (Note: 1. Average net holding cost of traders)
2. Arbitrage opportunities between exchanges:
1. Arbitrage opportunities between exchanges
2. Premium trading
Premium is a trading structure formed within an exchange. When trading on the market side, they may take advantage of the opportunity of price rise or fall, thus increasing the demand for long and short positions Short sellers usually carry out arbitrage in the case of call options, while long sellers can continue to short when the price is lower than the buyer’s minimum price and carry out arbitrage when the price is lower than the seller’s maximum price level, thereby reducing (or reducing) the pressure on long sellers.
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