Bitcoin’s (BTC) Price Hits Three-Month Low

Bitcoin’s price has reached a three-month low, reversing post-election gains after Donald Trump’s victory.

Why Bitcoin Is Crashing: Analyst Offers New Perspective

Crypto analyst Kyle Chasse attributes the current crypto market downturn to the unwinding of the cash and carry trade suppressing BTC’s price for months. Hedge funds took advantage of a low-risk arbitrage trade involving Bitcoin spot ETFs and CME futures.

> “Bitcoin is crashing. Wondering why? The cash & carry trade that’s been suppressing BTC’s price is now unwinding,” he stated.

This strategy included buying Bitcoin spot ETFs from BlackRock and Fidelity while shorting BTC futures on the CME, generating an annualized return of about 5.68%.

Some funds leveraged these positions to achieve double-digit returns. However, the collapse of this trade has led to massive liquidity withdrawals, plunging Bitcoin’s price.

BTC Price Performance. Source: BeInCrypto

In the past week, over $1.9 billion in Bitcoin has been sold, significantly reducing CME open interest as hedge funds unwind their positions. This prompted a double-digit percentage decrease in Bitcoin’s price within days.

Chasse emphasizes that hedge funds did not invest in Bitcoin for long-term appreciation but sought risk-free yields through arbitrage. With the trade now defunct, they are rapidly withdrawing liquidity, exacerbating the sell-off.

> “Why is this happening? Because hedge funds don’t care about Bitcoin. They weren’t betting on BTC mooning. They were farming low-risk yield. Now that the trade is dead, they’re pulling liquidity—leaving the market in free fall,” the analyst added.

Earlier, traders attributed Bitcoin’s downturn to Trump’s tariffs and fears surrounding tariffs against the European Union. The Bybit hack also contributed to negative investor sentiment.

While Bitcoin struggles, Chasse sees potential for recovery. Continued unwinding may lead to forced selling until all hedge fund positions are cleared, resulting in heightened volatility.

If accurate, Bitcoin will require long-term holders to absorb selling pressure. Technical analysis suggests that Bitcoin’s next target could be around $70,000, a key support level that may stabilize the market.

Bitcoin Global In/Out of the Money. Source: IntoTheBlock

At this level, 6.76 million addresses hold approximately 2.64 million BTC at an average price of $65,296, potentially providing significant support for Bitcoin’s price.

Chasse notes that while ETF-driven demand was partly real, it was significantly affected by arbitrage players seeking quick profits. Currently, the market undergoes a painful but necessary reset, with traders and investors bracing for volatility that could set the stage for Bitcoin’s next directional bias.