Bitcoin Seeks Comeback After Record $53 Billion Drawdown from ETFs: Bitcoin Chatter

Spot Bitcoin ETFs saw a record drawdown since Feb. 10, Bloomberg Intelligence analyst Eric Balchunas wrote in a note yesterday.

Since the start of the year through Thursday, Bitcoin has tumbled 14% as investors shunned riskier assets amid growing anxiety over the impact on the US and global economy from Trump tariffs and retaliatory tariffs from its trading partners. That contrasts with an almost 14% gain in spot gold. Based on Balchunas’s analysis, that’s not the only culprit behind the sell-off seen in Bitcoin spot ETFs.

“Hedge funds, the largest known holders of US spot Bitcoin ETFs, likely contributed to the category's record $5.3 billion of outflows over the past month due to the funds' use in a Bitcoin basis trade,” he said.

Balchunas was referring to the practice of selling futures contracts and buying an equal amount of the cryptocurrency in the spot market and profiting from that spread.

“Hedge funds are almost certainly using the spot ETFs for their long spot position in this trade, which is very profitable” when futures are priced meaningfully higher than the spot market, he explained.

The spread between the spot price and the futures price climbed between late October and January, he said. That gap, known as basis, averaged almost $1,200 on a one-month contract, representing more than 10% in annualized return, Balchunas said.

While the spread has since declined, traders and investors can still make money from the trade. Bitcoin futures for March delivery rose 5.2% to $84,440 as of 1:38 p.m. in New York Friday, according to Bloomberg data. Spot Bitcoin rose 4.9% to $84,220.67. That puts the spread between the two contracts at $219, excluding fees.  

Friday's trade overview data so far showed inflows into spot bitcoin outpacing outflows by $109.2 million. That helps trim the fourth straight monthly net outflow from spot Bitcoin, as shown in the chart above.