- Record outflows hit Bitcoin ETFs on Tuesday.
- Investors are unwinding their basis trade.
- Bitcoin slumped to a new 2025 low on Tuesday.
Not long ago, spot Bitcoin exchange-traded funds were breaking records ― billions in inflow as Bitcoin surged to a peak price of $108,000.
The tide turned. As Bitcoin tumbles to its lowest price this year, Bitcoin ETFs recorded $934 million in outflows, the largest ever for a single trading day.
The culprit, according to BitMEX co-founder Arthur Hayes: “Record outflows fit with an unwind of futures positions at CME due to basis compression,” Hayes posted on X on Wednesday.
That means that investors who seize on gaps in price between ETFs and futures are finding that trade less profitable as those gaps shrink. They’re now exiting, or unwinding, the trade, sending Bitcoin’s price lower.
Market signs
There were signs. Last week, JPMorgan analysts said that Bitcoin futures were approaching so-called backwardation ― when Bitcoin’s price becomes higher than that of the futures contracts tracking the cryptocurrency.
The development is “indicative of demand weakness by those institutional investors that use regulated CME futures contracts to gain exposure,” to crypto including Bitcoin, JPMorgan said.
The situation creates a feedback loop. Those unwinds send Bitcoin’s price lower, leading to more redemptions that spur other ETF investors to sell as well.
Most Bitcoin ETF investors aren’t long-term holders but rather use the investment vehicle for arbitrage trading.
That’s according to crypto research outfit 10x Research, which estimated that 56% of Bitcoin ETF buying activity is tied to arbitrage strategies.
‘Market-neutral’
With Bitcoin below $90,000, ETF investors are logging significant losses, according to Geoffrey Kendrick, global head of digital assets research at UK bank Standard Chartered.
Kendrick estimated that since November, the majority of ETF investors bought shares of the various funds at an average Bitcoin price of $96,500.
Kendrick warned that Bitcoin could fall close to $80,000, while Hayes said Bitcoin could fall even lower, to $70,000.
However, not everyone agrees with Hayes’ analysis.
10x Research analysts said ETF outflows from hedge funds unwinding their trades shouldn’t have a major effect on the price.
“Selling ETFs while simultaneously buying Bitcoin futures offsets any directional market impact,” the 10x Research report stated.
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? please contact him at osato@dlnews.com.
