How Does a ‘Cash-and-Carry Arbitrage’ Strategy Exploit a State of Contango?

A Cash-and-Carry Arbitrage exploits Contango by simultaneously buying the underlying asset (spot Bitcoin) and selling a futures contract on that asset. Since the futures price is higher than the spot price, the arbitrageur locks in a risk-free profit equal to the difference (minus the cost of carry).

The position is held until the futures expiration, at which point the spot and futures prices converge, and the profit is realized.