Market Turmoil: Bitcoin and ETF Outflows
Tuesday proved to be a challenging day for the cryptocurrency market, as Bitcoin (BTC) plummeted to three-month lows, dipping below $87,000. This significant decline not only impacted Bitcoin but also dragged the wider cryptocurrency market down with it. A noteworthy factor contributing to this downturn was the unprecedented withdrawal of funds from U.S.-listed spot Bitcoin exchange-traded funds (ETFs).
According to data compiled by SoSoValue, the 11 spot ETFs collectively experienced a staggering net outflow of $937.78 million, marking the most substantial single-day redemption since these funds commenced trading in January 2024. Among these funds, Fidelity’s FBTC faced the brunt of the outflows, witnessing a withdrawal of $344.65 million. Additionally, BlackRock’s IBIT followed closely with redemptions totaling $164.37 million, while the remaining ETFs recorded outflows of less than $100 million each.
The waning interest in these ETFs may be linked to a decline in the premium associated with CME-listed Bitcoin futures, which has diminished the attractiveness of cash-and-carry arbitrage opportunities. Currently, these BTC and ETH carry trades yield only marginally more than the U.S. 10-year Treasury note, which was offering a yield of 4.32% at the time of reporting. This strategy, which has garnered favor among institutional investors since early last year, involves purchasing the spot ETF while simultaneously shorting the CME futures, allowing investors to capitalize on the premium while avoiding the risks associated with price fluctuations.
According to Velo Data, the annualized one-month basis (premium) for CME Bitcoin futures dropped to 4% on Tuesday, the lowest level seen in nearly two years, and a dramatic reduction from nearly 15% in December. This indicates a significant decline in the yield potential for the cash-and-carry strategy over just two months. Similarly, the basis for ether futures has also seen a sharp decline, settling around 5%. On the same day, U.S.-listed spot ether ETFs recorded a total outflow of $50 million.
