Bitcoin ETF Cash-and-Carry Trade Collapses as Returns Plummet

As of March 21, 2025, the US Bitcoin ETF cash-and-carry trade, a key strategy for institutional investors, seems to be collapsing.

Market data shows annual returns for the Bitcoin ETF cash-and-carry trade have fallen to 2%, from much better figures late in 2024, when the futures premium came close to 15%. This decline tracks with heavy outflows from spot Bitcoin ETFs, with $180 million withdrawn over the past 30 days. 

Also read: Atai Life Sciences Invests $5M in Bitcoin—A Bold Move in Biotech

A record of $937.78 million was pulled on Feb. 26, 2025, including $344.65 million from Fidelity’s FBTC and $164.37 million from BlackRock’s IBIT, showing a general retreat from the approach.

Economic Factors Drive Bitcoin ETF Cash-And-Carry Trade Shift

The Bitcoin ETF cash-and-carry trade, which involves buying spot Bitcoin ETFs and shorting futures, relies heavily on the basis—the price spread between the two markets.

That spread has contracted sharply, with the one-month CME Bitcoin futures premium sliding from 15% in December 2024 to 4% by late February 2025.

The difference has drastically reduced, with the one-month CME Bitcoin futures premium declining from 15% in December 2024 to 4% by late February 2025.

Also read: Bitcoin ETF Flows Surge While Ethereum ETFs Struggle to Stay Afloat

Meanwhile, US Treasury yields have climbed to 4.32%, surpassing the trade’s returns and driving institutional investors to shift capital elsewhere. 

Bitcoin’s price swings, peaking at $109,000 in January and dipping to $76,000 in March, have added to investor nervousness, driving outflows and signaling a retreat from crypto as a risk-on asset in current economic conditions.

Investor Implications and Market Outlook

Individual investors have been selling on dips in prices due to the meltdown, a show of uncertainty in the market.

Also read: Bakkt Bets Big on Crypto: Leadership Shakeup & Core Focus Strategy

Institutions, in turn, are dismantling arbitrage positions, looking for safer options like bonds. Yet, historical data offers context: large ETF outflows in March 2025, August 2024, and April 2024 have previously been followed by market troughs, which provide chances for long-term investors.

Despite recent setbacks, net inflows since 2024 remain positive at $36.1 billion, an indicator of strength despite the recent market losses. For now, volatility and economic challenges suggest a cautious approach as investors navigate the shifting landscape.