- BitMEX co-founder Arthur Hayes warns Bitcoin could drop to $70,000 if hedge funds exit ETFs tied to futures arbitrage strategies.
- U.S. Bitcoin ETFs saw $517 million in outflows on February 24, the highest single-day withdrawal in seven weeks, per CoinGlass data.
- Bitcoin fell over 5% to $91,000 on February 25, testing support levels as ETF sell-offs amplified downward price pressure.
Bitcoin’s Fear & Greed Index has dropped to 25, signaling “Extreme Fear” as the cryptocurrency fell below $90,000 for the first time since August 2024. This metric, which measures market sentiment, mirrors conditions seen in early 2024 when Bitcoin traded near $48,000 before climbing to record highs.
Historical data shows that the last time the index reached this level, Bitcoin surged 78% to approximately $88,000 by November of that year. Yet, current reactions contrast sharply: buyers who previously drove prices higher during “Greed” phases now display caution despite similar price levels.
Arthur Hayes, co-founder of BitMEX, suggests Bitcoin could decline further to $70,000 if hedge funds unwind positions in spot Bitcoin ETFs. Hayes notes that many institutional investors, particularly those holding BlackRock’s iShares Bitcoin Trust (IBIT), entered these products to exploit price gaps between ETF shares and Bitcoin futures on the Chicago Mercantile Exchange (CME).
This arbitrage strategy, known as the “basis trade,” relies on capturing differences between spot and futures prices. However, Hayes argues that narrowing profit margins and falling Bitcoin prices could trigger mass exits from ETFs, forcing funds to sell holdings and repurchase CME futures to close positions.
Recent data by ETHNews shows early signs of this trend. On February 24, U.S. spot Bitcoin ETFs saw $517 million in outflows, the largest single-day withdrawal in seven weeks. BlackRock’s IBIT lost $159 million, while Fidelity’s Wise Origin Bitcoin Fund shed $247 million.
Other funds, including Bitwise and Invesco, also reported exits. Analysts like Markus Thielen of 10x Research attribute much of the ETF demand to short-term arbitrage activity rather than long-term investment, amplifying volatility.
Bitcoin’s price dropped over 5% in 24 hours, briefly hitting $91,000 on February 25 before a partial recovery. The sell-off aligns with Hayes’ warnings, though some traders point to the Fear & Greed Index’s historical patterns as a potential counterbalance.
Whether Bitcoin stabilizes or faces deeper declines may depend on how quickly institutional strategies shift—and whether retail investors mirror their caution. For now, the market remains suspended between conflicting signals of fear and opportunity.
