Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 17, 2023 erstellt
Description:
This paper comprehensively examines the risk-return relation of cryptocurrency carry trade using realistic borrowing and lending interest rates. We find significant violations of the uncovered interest rate parity in the cryptocurrency market. The cross-sectional carry trade strategy yields an annualized return of 46.71% and a Sharpe ratio of 0.77. Unlike fiat-currency carry trade which is vulnerable to crash risk, the cryptocurrency carry trade is resistant to the cryptocurrency market crashes in 2018 and 2021. We show that the crypto-carry trade returns cannot be explained by established risk factors from fiat currencies or cryptocurrencies. We find that geopolitical risk explains a substantial amount of the carry returns. Interestingly, the risk-adjusted crypto-carry return alpha is significantly negative, implying a negative cryptocurrency carry risk premium