What Is the ‘Cost of Carry’ and How Does It Contribute to a Contango Market?

The 'cost of carry' is the net cost of holding an asset over a period, typically including storage, insurance, and financing costs, minus any income received (like dividends or staking rewards). In crypto, it primarily includes the financing cost (interest rate) and any storage/security costs.

A positive cost of carry means holding the spot asset is expensive, incentivizing buyers to prefer the cheaper futures contract, thus pushing the futures price above the spot price, leading to contango.