**Arthur Hayes’ Cautionary Note: Could Bitcoin Tumble to $70,000 Amid Hedge Fund ETF Withdrawals?**
Arthur Hayes, co-founder of BitMEX, has raised concerns that Bitcoin might see a drop to $70,000 if hedge funds decide to pull out of ETFs linked to futures arbitrage strategies. Recent data from CoinGlass reveals that U.S. Bitcoin ETFs experienced a significant outflow of $517 million on February 24, marking the largest single-day withdrawal in seven weeks. Following this, Bitcoin’s price fell over 5% to $91,000 on February 25, as the sell-offs from ETFs intensified the downward pressure on prices.
Adding to the unease, Bitcoin’s Fear & Greed Index has plummeted to 25, indicating a state of “Extreme Fear” in the market. This decline is particularly notable as Bitcoin dipped below $90,000 for the first time since August 2024. The current sentiment echoes the market conditions of early 2024, when Bitcoin was trading around $48,000 before it surged to record highs. Historical trends show that the last time the index reached this low, Bitcoin experienced a remarkable 78% increase, reaching approximately $88,000 by November of that year. However, the current market response is markedly different; buyers who previously fueled price increases during “Greed” phases are now exhibiting caution, even with similar price points.
Hayes elaborates that many institutional investors, especially those invested in BlackRock’s iShares Bitcoin Trust (IBIT), entered these ETFs to take advantage of price discrepancies between ETF shares and Bitcoin futures on the Chicago Mercantile Exchange (CME). This strategy, known as the “basis trade,” aims to capitalize on the differences between spot and futures prices. However, Hayes warns that as profit margins shrink and Bitcoin prices decline, a wave of exits from ETFs could occur, compelling funds to liquidate their holdings and buy back CME futures to close their positions.
Recent findings from ETHNews indicate early signs of this trend. On February 24, U.S. spot Bitcoin ETFs recorded $517 million in outflows, the highest single-day withdrawal in seven weeks. BlackRock’s IBIT saw a loss of $159 million, while Fidelity’s Wise Origin Bitcoin Fund experienced a $247 million drop. Other funds, including Bitwise and Invesco, also reported similar exits. Analysts like Markus Thielen from 10x Research suggest that much of the demand for ETFs is driven by short-term arbitrage rather than long-term investment, which can heighten market volatility.
Bitcoin’s price fell over 5% within 24 hours, briefly touching $91,000 on February 25 before a partial recovery. This sell-off aligns with Hayes’ warnings, although some traders are looking to the historical patterns of the Fear & Greed Index as a potential stabilizing factor. The future trajectory of Bitcoin—whether it will stabilize or face further declines—may hinge on how quickly institutional strategies adapt and whether retail investors follow suit in their cautious approach. For now, the market finds itself caught between contrasting signals of fear and opportunity.
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