<\/p>\n
Large investors are unwinding Bitcoin cash-and-carry arbitrage as ETF inflows rise, CME basis compresses, and low volatility pushes them into stickier long exposure.<\/p>\n
<\/p>\n
Large institutional investors are reducing arbitrage positions in favor of direct bullish bets on Bitcoin, according to recent data from SoSoValue.<\/p>\n
<\/p>\n
U.S.-listed Bitcoin (BTC) Exchange-Traded Funds have recorded net inflows this month, reversing December\u2019s redemption trend, the data showed. The shift represents a move away from traditional \u201cCash-and-Carry\u201d arbitrage strategies toward directional long-term positions.<\/p>\n
The Cash-and-Carry arbitrage strategy involves purchasing spot Bitcoin ETFs while shorting Bitcoin futures to profit from pricing mismatches between spot and futures markets. The pricing gap between present and future contracts has narrowed, while funding costs for such trades have increased, reducing the strategy\u2019s profitability, according to market observers.<\/p>\n
U.S.-listed spot ETFs have recorded net inflows while the total number of open standard and micro Bitcoin futures contracts on the Chicago Mercantile Exchange has surged, the data indicated.<\/p>\n
The \u201cbasis\u201d\u2014the price gap between CME futures and spot ETFs\u2014has narrowed to levels that barely cover transaction costs and funding expenses, making carry trades less attractive, analysts said.<\/p>\n
Bitcoin has experienced low volatility since its sharp decline from its all-time high in October 2021, with prices trading within a narrow range recently. The low volatility environment reduces the likelihood of price mismatches between spot and futures markets, diminishing the profitability of Cash-and-Carry trades.<\/p>\n
Bitcoin\u2019s annualized 30-day implied volatility, as measured by Volmex\u2019s BVIV index, has fallen to a multi-month low in market expectations for price swings, according to analysts at cryptocurrency exchange Bitfinex.<\/p>\n
Bitfinex analysts characterized the new investors as \u201csticky\u201d because they view Bitcoin as a long-term investment rather than focusing on short-term profits from price gaps, citing reduced volatility as a factor.<\/p>\n
Data on short positions in CME-listed Bitcoin futures indicates that the increase in open interest stems from speculators betting on bullish outcomes rather than hedging with shorts, suggesting an overall increase in bullish exposure, according to the analysis.<\/p>\n
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