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Bitcoin Market Sees a Rough Day
Tuesday was a challenging day for the crypto market, as bitcoin (BTC) fell to three-month lows below $87,000, dragging the broader market down. The decline was further exacerbated by investors withdrawing funds from U.S.-listed spot bitcoin exchange-traded funds (ETFs) at an unprecedented rate.
Record Net Outflow from Spot ETFs
The 11 spot ETFs registered a cumulative net outflow of $937.78 million, the most significant single-day redemption since the funds began trading in January 2024, according to data tracked by SoSoValue.
Fidelity and BlackRock ETFs See Heavy Redemptions
Fidelity’s FBTC saw the most outflow, totaling $344.65 million, followed by $164.37 million in redemptions from BlackRock’s IBIT. The remaining funds registered outflows of less than $100 million each.
Why the Weakening Appetite for Spot ETFs?
The decline in the premium in the CME-listed bitcoin futures dented the appeal of the cash and carry arbitrage. Moreover, these BTC and ETH carry trades now offer barely more than the U.S. 10-year Treasury note, which offered a yield of 4.32% at press time.
Cash and Carry Arbitrage Strategy
The strategy, heavily favored by institutions since early last year, involves buying the spot ETF and simultaneously selling the CME futures to pocket the premium while bypassing the price direction risks.
Annualized One-Month Basis in CME Bitcoin Futures
According to Velo Data, the annualized one-month basis (premium) in the CME bitcoin futures dropped to 4% on Tuesday, the lowest in nearly two years, and down significantly from almost 15% in December. In other words, the yield available on the cash and carry strategy has declined dramatically in two months.
Spot Ether ETFs See Significant Outflow
The spot ether ETFs listed in the U.S. witnessed a total outflow of $50 million on Tuesday.
**Conclusion**
The recent decline in the crypto market, particularly in the bitcoin market, has led to a significant outflow of funds from U.S.-listed spot bitcoin exchange-traded funds (ETFs). This trend is attributed to the weakening appetite for the cash and carry arbitrage strategy, which has seen its yield decline dramatically in recent months. The spot ETFs, particularly Fidelity’s FBTC and BlackRock’s IBIT, have seen heavy redemptions, with a cumulative net outflow of $937.78 million.
**FAQs**
Q: What is the cash and carry arbitrage strategy?
A: The cash and carry arbitrage strategy involves buying the spot ETF and simultaneously selling the CME futures to pocket the premium while bypassing the price direction risks.
Q: Why has the yield on the cash and carry strategy declined?
A: The yield on the cash and carry strategy has declined due to the decline in the premium in the CME-listed bitcoin futures, making it less attractive to investors.
Q: What is the significance of the annualized one-month basis in CME bitcoin futures?
A: The annualized one-month basis in CME bitcoin futures is a measure of the premium available on the cash and carry strategy. The recent decline in this basis to 4% is a significant decline from its peak of 15% in December and indicates a decrease in the yield available on the strategy.
Q: What is the total outflow from spot ether ETFs?
A: The total outflow from spot ether ETFs listed in the U.S. was $50 million on Tuesday.
