Cash and carry is a strategy for extracting profit regardless of market direction.

Stable income from cryptocurrencies is a challenging task when assets are constantly rising or falling. However, there are proven methods to generate profit that work under any market conditions. Two of them are carry trade and cash and carry—arbitrage strategies that allow you to profit from price and rate discrepancies rather than guessing the trend direction.

Cash and Carry is primarily arbitrage between spot and derivatives

Cash and carry is a trading strategy that involves simultaneously opening two opposite positions on the same asset. The investor buys the cryptocurrency at the current price (spot price) and simultaneously sells a futures contract or options on the same asset at a higher price. The difference between these prices represents the potential profit.

Let’s consider a specific example: you buy 1 BTC at $65,000 and at the same time sell a futures contract for the same amount at $66,000. After the futures contract expires, you close the position and secure a guaranteed profit of $1,000, regardless of whether Bitcoin drops to $50,000 or rises to $80,000.

The key advantage of this approach is predictability. You know in advance what profit you’ll make because the spread between the spot price and the futures price (the so-called spread) is visible from the start. However, these discrepancies are usually small and often offset by storage fees or platform commissions.

Carry trade: earning from interest rate differences

Carry trade works on a different principle and exploits discrepancies not in prices but in interest rates. This strategy comes from traditional finance and involves borrowing money at a low interest rate in one place and investing it at a higher rate elsewhere.

Practical scenario: current interest rates in US banks are around 5% per year. You take a loan at this rate, convert dollars into USDT or USDC, and stake stablecoins on a crypto platform offering yields up to 18% annually. After the period ends, you repay the loan and keep the 13% difference as profit.

Why stablecoins and not volatile altcoins? Because investing in regular cryptocurrencies involves price fluctuations. An asset could drop so much in value that the profit from the interest rate difference is completely wiped out by losses. Stablecoins pegged to the dollar eliminate this risk and allow you to focus solely on extracting profit from the rate difference.

Comparison: when which strategy works better

At first glance, carry trade seems more attractive due to the potentially larger rate difference (in our example, 13% versus 1% in cash and carry). However, in practice, things are more complicated.

Cash and carry is a more reliable choice in terms of safety. Futures and options are traded on regulated platforms with good reputations, and the risk of losing funds is minimal. However, the small spread between spot and derivatives means that after commissions and storage costs, profit may be minimal or even negative.

Carry trade, on the other hand, can generate significantly higher profits thanks to the larger interest rate gap. The problem is the reliability of platforms offering high yields, which is often questionable. The crypto industry has many examples of platforms promising incredible returns and then disappearing with clients’ deposits. Listing high interest rates on a website is easy—whether the platform will actually pay remains the question.

Bank interest rates are more predictable, but the difference is often smaller. Moreover, conditions constantly change: the same rate discrepancy that worked yesterday may disappear today as banks revise interest rates or crypto platforms lower yields.

Why institutional investors succeed better

In traditional finance, carry trade is a primary tool for banks and large investment funds. They have several advantages over retail investors: timely access to rate movement information, huge capital volumes that allow them to profit from small spreads through large numbers, and reputation that enables borrowing at lower rates.

Retail traders lack these privileges. They often receive information later, work with smaller sums, and cannot leverage privileged credit lines. This means that even if a rate discrepancy exists, it may not be enough to profit after all commissions and costs.

What to pay attention to before using

If you decide to apply one of these strategies, pay attention to several critical points:

For cash and carry: thoroughly study the futures market, understand margin mechanics, and ensure the chosen platform has a good reputation and low storage fees.

For carry trade: check the financial health of the crypto platform where you plan to deposit funds. Look for information on reserves, security audits, and platform history. Never put all your funds on one platform.

For both strategies: remember that market conditions change. Monitor the economic situation in different countries, watch for changes in bank interest rates, and offers from crypto platforms. A strategy that was profitable last month may stop working next month.

Cash and carry is a strategy with more predictable but modest earnings, while carry trade can bring higher profits but requires greater caution in platform selection. The choice depends on your risk level, capital volume, and willingness to monitor markets closely.