Arthur Hayes, co-founder of BitMEX, suggested that Bitcoin's value could plummet to $70,000 if large hedge funds exit Bitcoin ETFs.
Background to Hayes' Prediction
Arthur Hayes commented on X that Bitcoin might face a sharp price reduction due to potential outflows from ETFs such as BlackRock iShares Bitcoin Trust (IBIT). Many IBIT holders are hedge funds that employ a low-risk strategy that yields more than short-term US Treasury bonds.
Arbitrage Strategies of Hedge Funds
Funds are utilizing a strategy known as the 'basis spread,' capturing yield between the spot price of Bitcoin tracked by ETFs and its futures price on CME. If Bitcoin's price drops, the basis narrows, compelling funds to sell IBIT and rebuy CME futures, potentially pushing prices down to $70,000.
Current Trends and ETF Outflows
CoinGlass data shows that February 24 recorded the largest single-day outflow in seven weeks from Bitcoin ETFs, totaling $517 million. The BlackRock and Fidelity funds experienced the largest outflows, amounting to $159 million and $247 million respectively.
A Bitcoin drop to $70,000 could be triggered by hedge funds actively exiting ETFs, driven by decreasing basis spread. Current outflow trends indicate possible market challenges ahead.
