In a recent explanation, James Check, lead analyst at Glassnode, shed light on the enigmatic Bitcoin cash and carry trade, clarifying its mechanics and dispelling common misconceptions about its influence on market structure. Check's insightful explanation revealed the intricacies of this trading strategy and its far-reaching implications for Bitcoin markets.

At its core, the cash and carry trade is a delta-neutral strategy employed in both calendar expiring futures and perpetual swap funding rates. Check emphasized that this approach is not unique to Bitcoin but is a fundamental aspect of any asset with a futures market. The strategy involves taking a long position in the spot market or ETFs while simultaneously shorting the futures market, creating an arbitrage opportunity.

Check dispelled the misconception that the spot price is being suppressed by these short positions, instead highlighting that the existence of the trade reflects a net bullish sentiment where long positions push futures prices higher. The missing element, Check suggested, is a substantial impulse of non-arbitrage demand that could overwhelm the sell-side pressure from HODLers and existing holders.

Through a visual representation, Check illustrated the dynamic nature of funding rates and their influence on market liquidity and structure. The chart showed Bitcoin's perpetual futures funding rates over time, highlighting periods of positive and negative funding rates and their relationship with Bitcoin's price.

In conclusion, Check's explanation provided valuable clarity on the Bitcoin cash and carry trade, dispelling confusion and highlighting its impact on market structure. This insight is crucial for traders and investors seeking to understand the intricacies of Bitcoin markets and make informed decisions. As Check emphasized, this phenomenon is not unique to Bitcoin and will persist as long as the market reaches a significant size.