Carry and Financing for Crypto Assets
Live Markets Editorial Team
Updated:
A long-form guide to carry and financing for Crypto Assets, covering network use, token supply, liquidity, technology, incentives, security, and policy.
Crypto carry combines several distinct costs
Carry describes costs or receipts associated with maintaining an exposure over time, but the calculation depends on the instrument. A spot holder, a dated-futures position, a perpetual swap, and a lending position do not share one financing mechanism. Start by listing the actual assets, contracts, collateral, and holding period rather than assigning one generic carry rate to a token.
A basis trade may combine spot with derivative exposure. The price difference can change, and positions can face fees, funding, slippage, and collateral demands. A quoted basis is not a guaranteed return through expiry.
Funding and expiry affect derivatives differently
Perpetual swaps may apply recurring funding transfers under venue-specific rules. The rate can change between intervals. Dated futures have an expiry and settlement process, and their relationship with spot can move beforehand. Do not model perpetual funding as identical to rolling dated futures.
For a futures-and-spot position, name the contracts and basis convention, then track both legs. Basis changes can affect results independently of spot. Settlement index design and venue procedures matter near expiry.
Borrowing and lending rates are conditional
Borrowing crypto or fiat may involve variable rates, collateral requirements, and platform-specific terms. Lending rates can change with utilization. A displayed rate may be a snapshot; it does not establish that funds can be borrowed or lent at that rate for the full period.
Centralized services and decentralized protocols have different custody, counterparty, smart-contract, and liquidation exposures. Rules can change, and on-chain activity does not eliminate technical or market risks. Review the actual agreement or protocol mechanics rather than treating a rate as dependable income.
- Borrowing or lending venue, asset, rate basis, and reset conditions
- Collateral type, valuation, haircut, and liquidation threshold
- Derivative funding interval or futures expiry and settlement terms
Model collateral and leverage as active risks
Leverage magnifies exposure relative to collateral, and a price move can trigger a margin call or liquidation under applicable rules. Crypto collateral may fall in value while a position needs more support. Stablecoin collateral also depends on the token and venue.
A carry comparison should include fees, financing changes, custody or protocol risks, and adjustment constraints. Simplified calculations do not capture every execution or failure scenario.
Do not turn a rate snapshot into a yield promise
Report the observation time, instrument, rate source, collateral assumptions, and costs left out of the estimate. Positive funding or a lending quote does not guarantee a net gain: prices, rates, fees, liquidity, and platform conditions can all change. This is educational information, not individualized investment, tax, legal, or accounting advice.
Sources / References
- BIS Working Papers No. 1171: DeFi Leverage — Bank for International Settlements — Supports the article's treatment of leverage, collateral, funding, liquidation, and interconnectedness in crypto-native finance.
- Crypto Lending Letter Response — U.S. Securities and Exchange Commission — Supports the article's distinction between crypto lending products, yield claims, investor protections, and platform or counterparty risk.
- Addressing the Risks in Crypto: Laying Out the Options — Bank for International Settlements — Supports the article's treatment of crypto financing, risk transfer, regulation, and the limits of headline yield comparisons.