1/ Why are basis spreads not collapsing as arb capital crushes everything into more normal cost of cash capital? In many ways it's structural - couple thoughts on physical settlement and margin

2/ A less often discussed aspect of this premium is the lack of liquid physically settled futures. You might see the quarterly premiums and think billions of capital could flow into a short basis trade and churn yield BUT a massive constraining factor outside of open interest is

3/ cash settled futures require rolling or exiting by matching a 1H TWAP strike on expiry. Assume eventually all short basis flow has to exit back to real cash, the spot market cannot eat billions of expiry flow in one hour so the trade becomes size constrained.

4/ Physical settlement helps solve this, esp. for the coin-margined exchanges.

The largest point of access for tradfi capital into crypto is the CME and the margin requirement there is extremely brutal to the upside and the CME of course does not take BTC as collateral

5/ IF the CME decided to take BTC as collateral AND allow physical settlement of futures, you could see the calendar basis get crushed. Until the page is turned, the market structure favors the leverage flow widening the spreads while the arb capital cannot compete 1:1. After all

6/ you have millions of individual traders demanding leverage on multiple x's while there are only so many 1B+ pockets of cash willing to step in under a market structure where it's difficult to exit back to cash in size quickly and has large blowout risk in upside moves.

7/ Is the lack of physically settled, coin margined, brokerage account point of access futures good or bad for the crypto market? I'm not sure - arguably it's good in many ways for this to be delayed as long as possible for yields but feels like eventually it will come