VanEck Head of Digital Assets Research: Huge Outflows from Bitcoin ETF May Be Due to Hedge Funds Unwinding Basis Trade Strategies

Bitcoin ETFs have seen outflows of approximately $2.1 billion for six consecutive days, marking the longest period of fund outflows since June of last year. Matthew Sigel, head of digital asset research at VanEck, believes that the record outflows may stem from hedge funds unwinding a popular strategy known as "basis trading," which profits from the price differences between the spot and futures markets. Some funds use ETFs to profit from the volatility of cryptocurrencies or to hedge short positions in derivatives. He explained, "This strategy involves buying Bitcoin spot (usually through ETFs) while shorting Bitcoin futures to lock in low-risk returns. However, the profits from this trading have recently collapsed, significantly reducing its attractiveness. As a result, hedge funds using ETFs for this trading may have closed their positions, leading to large redemptions."