U.S. Bitcoin ETFs Face $516M Outflows as Basis Trade Drops to 4%
U.S. spot bitcoin exchange-traded funds (ETFs) recorded their second-largest outflows of the year on Monday, shedding $516.4 million as bitcoin slid toward $90,000, according to data from Farside.
This marked the ninth net outflow in the past 10 trading days, reflecting growing investor uncertainty as BTC struggled within a tight range between $94,000 and $100,000 throughout most of February. The selling pressure intensified on Tuesday, pushing bitcoin out of its three-month trading channel and sending it as low as $88,250.
Market data from Velo indicates that the annualized bitcoin CME basis—the spread between spot and futures prices—has fallen to 4%, its lowest level since the launch of bitcoin ETFs in January 2024. This decline signals a weakening cash-and-carry trade, a market-neutral strategy where traders profit from price discrepancies by holding a long position in spot markets while shorting futures contracts.
Typically, investors collect a premium between spot and futures prices until the contract expires. However, with the basis now below the so-called risk-free rate—the 5% yield on the U.S. 10-year Treasury—some investors may unwind their positions in search of higher returns. This could lead to further ETF outflows as traders close their long positions and simultaneously cover their short bets in the futures market.
BitMEX co-founder Arthur Hayes hinted at this scenario in a recent post on X, suggesting that hedge funds engaging in this basis trade could begin exiting their positions during U.S. trading hours.
“Lots of IBIT holders are hedge funds that went long ETF, short CME futures to earn a yield higher than short-term U.S. Treasuries,” Hayes wrote. “If that basis drops as bitcoin falls, then these funds will sell IBIT and buy back CME futures. These funds are in profit, and with the basis now close to Treasury yields, they will unwind to lock in gains. $70,000 I see you mofo!”
With ETF outflows mounting and basis trade profitability fading, bitcoin could face additional downside pressure in the coming days.
