Bitcoin Could Drop to $70K as ETF Unwinds Accelerate, Says Hayes

• Hedge funds are exiting Bitcoin ETF arbitrage trades, increasing selling pressure and potentially pushing Bitcoin’s price down to $70,000.
• U.S. Bitcoin ETFs saw $517 million in daily outflows, with BlackRock and Fidelity experiencing the largest withdrawals from their funds.
• The unwinding of ETF arbitrage positions could create a feedback loop, accelerating Bitcoin’s decline if selling pressure persists.

Large hedge funds are beginning to exit their Bitcoin ETF arbitrage positions, adding selling pressure to the market. BitMEX co-founder Arthur Hayes warns that Bitcoin could face a decline to $70,000 as a result.

Hayes examined X to explain why institutional investors who purchased BTC ETFs like BlackRock iShares Bitcoin Trust (IBIT) currently dispose of their holdings. These funds had applied a trading approach by buying Bitcoin exchange-traded funds directly but also sold short Bitcoin futures traded on the Chicago Mercantile Exchange (CME). The plan aimed at taking advantage of the yield spread because the spread exceeded what short-term U.S. Treasurys could yield.

Basis Spread Decline Triggers Mass Exit

As Bitcoin’s price fluctuates, the premium on futures contracts diminishes. When the basis spread becomes less attractive, hedge funds unwind their trades by selling ETF holdings and buying back their short CME futures contracts. Hayes noted that many of these traders are currently profitable, making it an ideal time for them to exit. As a result, ETF outflows are increasing, causing a cascading effect in the market.

Data from Feb. 24 revealed that U.S. spot Bitcoin ETFs saw their largest daily outflow in seven weeks. The combined outflows from eleven Bitcoin ETFs reached $517 million. The recent withdrawals from BlackRock’s IBIT reached $159 million and Fidelity’s Wise Origin Bitcoin Fund experienced losses of $247 million. ETFs managed by Bitwise, Invesco, VanEck, WisdomTree as well as Grayscale experienced outflows in data records.

The present selling activity might pull Bitcoin’s price value downwards.

Market experts identify this type of fund reduction as a procedure that generates an ongoing cycle. Sharply increasing ETF share sales from hedge funds generates higher pressure which drives Bitcoin prices downwards. Excessive extra selling operations lead to more price reductions which triggers more investors to sell their crypto holdings. Bitcoin prices might fall to $70,000 based on the ongoing pattern of selling activity.

Bitcoin fell abruptly by 5% throughout the last 24 hours to achieve a daily minimum of $91,000 before recovering slightly on Feb. 25. ETF fund withdrawals created what analysts recognize as the primary selling force behind Bitcoin’s market reduction while fears emerge about potential price volatility.