The price of the leading cryptocurrency could fall to $70,000 if hedge funds liquidate positions in spot exchange-traded funds (ETFs) based on it, according to former BitMEX CEO Arthur Hayes.
#Bitcoin goblin town incoming:
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.If that basis drops as $BTC falls, then these funds will sell $IBIT and buy back CME futures.
These… pic.twitter.com/3PskTxrBPR
— Arthur Hayes (@CryptoHayes) February 24, 2025
The expert noted that the holders of these products aim to capture the so-called “basis spread,” which arises from the difference between longs in ETFs and shorts on futures traded on the CME.
This strategy is appealing to hedge funds when the yield exceeds that of short-term US Treasury bonds.
In a scenario where this spread disappears, open positions in ETFs and futures will be unwound, leading to a drop in the price of the leading cryptocurrency to $70,000, Hayes believes.
Earlier, 10x Research also highlighted the significant role of arbitrage hedge funds in the demand for exchange-traded products.
If the price of the underlying asset falls, the futures premium shrinks, prompting the sale of ETFs and increasing pressure on derivative prices. This exacerbates negative dynamics in the spot market, creating a feedback loop where even more funds rush to “cash out.”
In February, amid a downturn in the cryptocurrency market, net outflows from BTC-ETFs reached $516.41 million. This figure was a record for February and the third largest since the beginning of the year.
According to a forecast by Bitwise, in 2025, net inflows into spot Bitcoin ETFs could exceed $50 billion.