Bitcoin ETFs Face Record Outflows as Institutional Interest Wanes

Crypto markets took a hit on Tuesday as institutional investors pulled back from bitcoin and ether spot ETFs, citing diminishing returns from the once-profitable carry trade strategy.

Bitcoin (BTC) fell below $87,000, marking its lowest level in three months and triggering a wave of outflows from U.S.-listed spot bitcoin ETFs. According to data from SoSoValue, these funds saw a record single-day net outflow of $937.78 million, the largest since their inception in January 2024.

Fidelity’s FBTC led the withdrawals with $344.65 million in outflows, followed by BlackRock’s IBIT, which saw redemptions of $164.37 million. Other funds registered outflows below the $100 million mark.

The declining premium on CME bitcoin futures is a key factor behind this shift. The cash-and-carry trade—where investors buy spot ETFs while shorting CME futures—has become significantly less attractive, as returns have dropped to levels comparable with the U.S. 10-year Treasury note, which currently yields 4.32%.

Data from Velo Data shows the annualized one-month basis in CME bitcoin futures plummeted to 4% on Tuesday, its lowest point in nearly two years and a sharp decline from the 15% seen in December. The basis in ether futures has also dropped to around 5%, leading to $50 million in outflows from U.S. spot ether ETFs.

With carry trade profits shrinking, institutional investors appear to be reallocating capital, potentially signaling a shift in sentiment toward crypto ETFs in the short term.