STRATEGIES
Carry Trade (Cryptocurrency Carry Trade)
Definition
A carry trade involves borrowing low-yield assets to invest in higher-yield assets, profiting from the interest rate differential while exposed to exchange rate risk.
Example
Example
Borrowing stablecoins at 3% APR to lend other tokens at 8% APR, earning 5% spread while exposed to the borrowed token's price risk.
Risks to Consider
Risks
- Currency/token price risk
- Interest rate changes
- Liquidity risk
- Margin calls