STRATEGY OVERVIEW
BTC Funding Rate Carry
A delta-neutral position that earns the periodic payment made by leveraged buyers to short holders in perpetual futures markets.
WHAT IT IS
Market structure income, not speculation
In perpetual futures markets, the price of a contract must track the spot price of the underlying asset. When many traders hold leveraged long positions — as typically occurs in bull markets — the mechanism that keeps prices aligned is the funding rate: a periodic payment from longs to shorts.
AVREUM's position captures this payment by holding a short perpetual position, offset by an equal spot long. The price exposure of the two legs cancels out: if BTC rises, the spot leg gains and the perp leg loses by the same amount. If BTC falls, the reverse. Net price exposure is zero.
What remains is the funding income — collected every 8 hours, as long as the rate is positive and the position is maintained.
POSITION
BTC Spot Long + BTC-USDT Perp Short (equal notional)
RETURN SOURCE
Funding rate collected on short perp position (8h settlements)
DIRECTION EXPOSURE
Zero — delta-neutral by construction
LEVERAGE
Zero — both legs fully margined at 1x
EXCHANGE
Bybit (USDT-margined perpetual)
RISK FRAMEWORK
Known risks, managed explicitly
Funding Rate Risk
PRIMARYThe funding rate can turn negative. When it does, the position pays rather than receives. AVREUM monitors the rate daily. If it turns negative and remains negative for three consecutive days, the position is exited. This is the most likely scenario requiring action.
MITIGATION
Daily monitoring. Exit protocol triggered at sustained negative rate.
Exchange Counterparty Risk
STRUCTURALBoth legs are held on a single exchange. In the event of exchange failure, insolvency, or extended downtime, access to both legs may be restricted. This risk cannot be eliminated through operational discipline alone.
MITIGATION
Exchange selection: Bybit — regulated, liquid, established. Risk disclosed explicitly in all investor reporting.
Execution Risk
OPERATIONALEntry and exit require simultaneous execution of two legs. Price divergence between the moment legs are opened can create a brief directional exposure. At pilot capital size this is immaterial, but it is documented.
MITIGATION
Written entry protocol: spot leg first, perp leg second. Limit orders for entry, market orders for emergency exit.
Leg Drift
OPERATIONALOver time, accumulated funding payments can alter the relative size of the two legs, creating a small net delta. This is monitored weekly and rebalanced if the divergence exceeds 5%.
MITIGATION
Weekly position balance check. Rebalancing protocol documented and followed.
WHAT THIS STRATEGY IS NOT
It is not speculation on BTC price direction. The position makes no prediction about whether BTC goes up or down.
It is not a yield product with a fixed or guaranteed return. The return varies with market conditions and is always stated as measured, not projected.
It is not a hedge fund, a fund of funds, or a discretionary trading strategy. There is no leveraged speculation, no derivatives complexity beyond the structure described above.
It is a carry trade — a well-understood structure applied to a relatively new market, with the same logic as any other basis trade: earn the spread between two related instruments.
REPORTING COMMITMENT
Every number, every month
Every report includes: opening and closing balance, net P&L, annualised equivalent, weekly funding breakdown, full cost summary, position status at period end, risk commentary, and next-period outlook.
Reports are produced within five business days of period end. Format is consistent. No exceptions.