U.S. Bitcoin ETFs Log Year’s 2nd-Highest Withdrawals as Basis Trade Falls Below 5%

U.S. Bitcoin ETFs See $516M in Outflows as Basis Trade Slips Below 5%

Bitcoin exchange-traded funds (ETFs) in the U.S. recorded their second-largest outflows of the year on Monday, shedding $516.4 million as BTC’s price tumbled toward the $90,000 mark, according to Farside data.

This marked the ninth outflow in ten trading sessions, highlighting increased investor hesitation as bitcoin struggled to maintain its footing within the $94,000-$100,000 range throughout February. On Tuesday, the selling pressure deepened, forcing BTC out of its three-month consolidation and down to a low of $88,250.

Meanwhile, the bitcoin futures market showed signs of stress, with Velo data revealing that the CME annualized basis—the premium between bitcoin’s spot and futures prices—had dropped to 4%, its lowest level since the launch of spot ETFs in January 2024.

The basis trade, a common arbitrage strategy where traders long spot BTC and short futures contracts to capture a premium, has become less attractive as the spread now lags behind the risk-free rate of 5% offered by U.S. 10-year Treasuries. This shift may prompt more funds to exit ETF positions and unwind short futures trades, accelerating outflows.

BitMEX co-founder Arthur Hayes weighed in on the trend, suggesting on X that hedge funds engaging in the basis trade may start closing positions.

“Many IBIT holders are hedge funds running the ETF-long, CME-short strategy to earn a better yield than Treasuries,” Hayes wrote. “With the basis dropping as BTC falls, these funds will sell IBIT and buy back CME futures. They’re already in profit, and with the basis nearing Treasury yields, expect an unwind during U.S. trading hours. $70,000, I see you mofo!”

As ETF outflows persist and the basis trade weakens, bitcoin could see increased volatility in the coming days.