How does contango affect the profitability of holding cryptocurrency long-term?

5 answers

• sushilkumarApr 03, 2024 · a year ago
  Contango can have a significant impact on the profitability of holding cryptocurrency in the long term. In contango, the futures price of a cryptocurrency is higher than the spot price, indicating market expectations of future price increases. This can lead to negative roll yield for investors who hold cryptocurrency futures contracts. Negative roll yield occurs when an investor sells a futures contract at a lower price and buys a new contract at a higher price due to the upward sloping futures curve. As a result, holding cryptocurrency futures contracts in contango can erode long-term profitability. To navigate this situation, investors can consider alternative investment strategies such as spot trading or holding physical cryptocurrency. Spot trading involves buying and selling cryptocurrency at the current market price, eliminating the impact of contango on futures contracts. Holding physical cryptocurrency allows investors to avoid the negative roll yield associated with contango. Additionally, staying informed about market trends and monitoring the futures curve can help investors make informed decisions about holding cryptocurrency in contango.
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• KEVIN ESTEBAN RAMIREZ OSORIOSep 24, 2021 · 4 years ago
  Contango can be a double-edged sword when it comes to the profitability of holding cryptocurrency in the long term. On one hand, contango indicates market expectations of future price increases, which can be beneficial for investors. However, contango also leads to negative roll yield for investors who hold cryptocurrency futures contracts. This means that investors may end up selling contracts at lower prices and buying new contracts at higher prices, resulting in a loss. Therefore, it's crucial for investors to carefully consider the impact of contango on their long-term profitability and explore alternative strategies if necessary.
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• Shadmehr SalehiSep 12, 2024 · 10 months ago
  Contango can have a significant impact on the profitability of holding cryptocurrency in the long term. When a cryptocurrency is in contango, it means that the futures price is higher than the spot price. This can create a negative roll yield for investors who hold futures contracts, as they would have to sell contracts at a lower price and buy new contracts at a higher price. This erodes the profitability of holding cryptocurrency in the long term. However, it's important to note that not all cryptocurrencies are affected by contango in the same way. Some cryptocurrencies may have a more pronounced contango effect, while others may be less affected. Therefore, it's crucial for investors to carefully analyze the contango situation for each specific cryptocurrency before making investment decisions.
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• SubhanJan 01, 2025 · 7 months ago
  Contango can impact the profitability of holding cryptocurrency in the long term. When a cryptocurrency is in contango, it means that the futures price is higher than the spot price. This can create a negative roll yield for investors who hold futures contracts, as they would have to sell contracts at a lower price and buy new contracts at a higher price. However, it's important to note that the impact of contango on profitability can vary depending on the specific cryptocurrency and market conditions. Some cryptocurrencies may be more affected by contango, while others may be less affected. Therefore, it's crucial for investors to carefully analyze the contango situation and consider other factors such as market trends and volatility before making long-term investment decisions.
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• Kokholm DuranSep 16, 2022 · 3 years ago
  Contango can have a significant impact on the profitability of holding cryptocurrency in the long term. In contango, the futures price of a cryptocurrency is higher than the spot price, indicating market expectations of future price increases. This can lead to negative roll yield for investors who hold cryptocurrency futures contracts. Negative roll yield occurs when an investor sells a futures contract at a lower price and buys a new contract at a higher price due to the upward sloping futures curve. As a result, holding cryptocurrency futures contracts in contango can erode long-term profitability. Investors should consider alternative strategies such as spot trading or holding physical cryptocurrency to mitigate the impact of contango on profitability.
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