Awesome article, really have enjoyed your newsletter Ori. Not sold on this one though.
If I put my TradFi brain on - the carry on owning any financial asset and simultaneously shorting it (e.g. owning a share of stock and shorting a total return swap) in the long term should be 0 under the no arbitrage principle and negative after transaction costs.
Even if I buy that the carry on the perpetual swaps used to hedge UXD will remain positive for a long time as the crypto space expands, why wouldn‘t you expect it to settle in at 0 long-term? That also ignores transaction costs, which will be higher if the marketcap for UXD is high.
Thanks again for another great analysis, Ori :-)
Excellent breakdown Ori.
Awesome article, really have enjoyed your newsletter Ori. Not sold on this one though.
If I put my TradFi brain on - the carry on owning any financial asset and simultaneously shorting it (e.g. owning a share of stock and shorting a total return swap) in the long term should be 0 under the no arbitrage principle and negative after transaction costs.
Even if I buy that the carry on the perpetual swaps used to hedge UXD will remain positive for a long time as the crypto space expands, why wouldn‘t you expect it to settle in at 0 long-term? That also ignores transaction costs, which will be higher if the marketcap for UXD is high.
Would really appreciate a response here.