Bitcoin faces possible plunge to $70,000 if ETF sell-offs persist – Arthur Hayes

Arthur Hayes warns hedge funds might trigger Bitcoin drop due to ETF and futures strategy shifts.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

Arthur Hayes, co-founder of BitMEX and Chief Investment Officer at Maelstrom, has cautioned that Bitcoin’s price could drop as low as $70,000 due to ongoing bearish momentum.

This comes as Bitcoin recently slumped to a three-month low of $88,273—its lowest point since mid-November, according to CryptoSlate data.

Why BTC price might fall further

In a Feb. 25 analysis on social media platform X, Hayes explained that institutional investors have shifted focus to spot Bitcoin ETFs like BlackRock’s IBIT in search of higher returns.

According to him:

“Lots of IBIT holders are hedge funds that went long ETF short CME future to earn a yield greater than where they fund, short term US treasuries.”

This strategy, known as the long ETF-short futures approach, allows hedge funds to leverage the basis between ETF prices and futures contracts. The approach is typically used for hedging purposes, to manage risk, or to gain exposure to an asset class while minimizing downside potential

However, Hayes warned that if this yield basis narrows further, these funds could unwind their positions by selling ETFs and buying back CME futures, triggering a potential price drop for Bitcoin.

He concluded:

“These funds are in profit, and given basis is close to UST yields they will unwind during US hours and realise their profit. $70,000 I see you.”

Bitcoin ETF outflows

This warning aligns with an ongoing trend of outflows from US-based spot Bitcoin ETFs. According to CoinShares, these products recorded outflows totaling $560 million last week due to growing economic uncertainty.

This trend has persisted in the new week, with data from Farside showing that spot Bitcoin ETFs collectively experienced $516.41 million in outflows on Feb. 24. This marks the second-highest single-day outflow recorded this year.

Fidelity’s FBTC led the way in losses, experiencing significant outflows totaling $246.96 million. BlackRock’s IBIT followed closely behind, recording $158.59 million in redemptions.

Meanwhile, this capital exodus was not limited to these major players, as other investment products also witnessed considerable outflows.

Grayscale’s GBTC recorded a loss of $59.5 million, while Invesco Galaxy’s BTCO saw $15.02 million in withdrawals. WisdomTree’s BTCW and Bitwise’s BITB registered outflows of $12.5 million and $10.3 million, respectively.

Additionally, VanEck’s HODL also felt the pressure, losing $7.33 million, with Grayscale’s mini Bitcoin Trust shedding an additional $6.25 million.

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