Bitcoin futures’ once-lucrative carry trade has lost its appeal, with quarterly basis yields remaining below two-year U.S. Treasury rates since February. The shift highlights a sharp reduction in arbitrage returns and signals increasing maturity within the crypto market.
A strategy that previously delivered outsized profits for traders has now fallen behind traditional fixed-income investments, with bitcoin futures underperforming government bonds month after month.
During the 2021 bull market, bitcoin futures carry strategies routinely generated annualized returns above 20% across both regulated and offshore exchanges. Traders typically earned these returns by shorting bitcoin futures while simultaneously holding spot bitcoin exposure through ETFs or other vehicles. Today, the same approach produces only about 3%, compared with approximately 3.8% from two-year Treasury securities.
Futures markets have historically allowed traders to capitalize on price differences between futures contracts and spot markets, known as the basis. However, the annualized bitcoin futures basis has remained below the yield offered by two-year Treasury notes for more than five months, according to Glassnode data.
Glassnode said three-month bitcoin futures basis yields have stayed beneath two-year Treasury rates since February, marking only the second extended period of this kind on record. The previous occurrence ran from August 2022 through January 2023 and concluded around the market cycle bottom.
The current period has lasted 157 days, with three-month futures basis yields continuing to trail Treasury returns.
When futures carry opportunities offer lower returns than short-term government debt, traders and institutional investors have less incentive to deploy capital into arbitrage strategies. Instead, investors can earn a comparable or higher return through safer Treasury instruments without taking on crypto market risk.
The decline in futures yields has contributed to weaker bitcoin derivatives activity. July bitcoin futures volume fell slightly above $880 million, extending the drop from February’s $1.47 trillion high, according to Coinglass data. The broader downturn across digital assets has also played a role in reducing trading activity.
However, the collapse in the futures basis may also reflect a healthier market structure. Since basis trades depend on price differences between connected markets, smaller spreads indicate improved efficiency. As the market matures, reduced arbitrage gaps could lead to tighter spreads, stronger liquidity, better hedging conditions, and fewer extreme trading opportunities.
