Bitcoin (BTC) has plunged to a three-month low, wiping out its post-election gains following Donald Trump’s victory. While many blamed the drop on Trump’s tariffs and the Bybit hack, analysts now point to a deeper structural issue.
Why Is Bitcoin Crashing?
Crypto analyst Kyle Chasse believes the current crash is linked to the unwinding of a cash and carry trade, which has been suppressing Bitcoin’s price for months.
Hedge funds used a low-risk arbitrage strategy, buying Bitcoin spot ETFs (such as BlackRock’s IBIT and Fidelity’s FBTC) while shorting BTC futures on the CME. This allowed them to farm a steady yield of 5.68% per year. Some funds leveraged their positions, increasing returns even further.
However, this trade is now collapsing, forcing hedge funds to pull liquidity, triggering Bitcoin’s rapid decline.
$1.9 Billion in Bitcoin Sold: A Market in Free Fall
📉 Key Impacts of the Cash & Carry Unwind:
✔ $1.9 billion in BTC sold in the past week
✔ CME open interest plummeting as hedge funds exit positions
✔ Bitcoin price dropping by double digits within days
Chasse emphasizes that hedge funds never invested in Bitcoin for its long-term potential. Instead, they were exploiting arbitrage for short-term, risk-free gains. Now that the trade has ended, they are rapidly withdrawing funds, leaving the market in chaos.
🗣️ “Hedge funds don’t care about Bitcoin. They weren’t betting on BTC skyrocketing. They were farming yield. Now that the trade is dead, they’re pulling liquidity—leaving the market in free fall.” — Kyle Chasse
Can Bitcoin Find Support at $70,000?
Before analysts identified this structural issue, many traders blamed the crash on Trump’s tariffs on the EU and the Bybit hack. While these factors added to investor fears, the primary cause remains the unwinding of leveraged positions.
🔍 Looking Ahead:
✔ More forced selling expected as hedge funds clear positions
✔ Increased volatility as leveraged trades get liquidated
✔ Bitcoin may test $70,000, a key support level
At this price, 6.76 million addresses hold 2.64 million BTC, acquired at an average of $65,296. This strong buying zone could prevent further losses.
📊 While ETF-driven demand was real, it was heavily influenced by arbitrage traders. With them gone, the market is undergoing a necessary reset, setting the stage for Bitcoin’s next big move.
Final Thoughts: What’s Next for Bitcoin?
Bitcoin’s recent plunge highlights the impact of institutional trading strategies on price movements. With hedge funds exiting the market, volatility is expected to continue. However, if long-term holders step in, Bitcoin could stabilize around $70,000.
Will Bitcoin recover, or is more downside ahead? Let us know your thoughts!
