YEREVAN (CoinChapter.com) — Bitcoin (BTC) price has fallen to its lowest level in three months, wiping out its gains after Donald Trump’s election victory. The sudden drop raised concerns, with some traders linking it to Trump’s tariff policies and the Bybit hack. However, analysts point to a more technical reason for the decline.
Unwinding Cash-and-Carry Trade Triggers Bitcoin Sell-Off
Crypto analyst Kyle Chasse attributes the decline to the collapse of the cash-and-carry trade, a strategy that hedge funds used for months to generate low-risk returns. This trade involved buying Bitcoin spot ETFs, such as BlackRock’s IBIT and Fidelity’s FBTC, while shorting CME BTC futures. The strategy provided an annualized return of 5.68%.
As this trade collapses, large investors are withdrawing liquidity, leading to aggressive selling.
“Bitcoin is crashing. Wondering why? The cash & carry trade that’s been suppressing BTC’s price is now unwinding,”
said Chasse.
Bitcoin Sell-Off Explained: Kyle Chassé Reveals Hedge Funds’ Role in BTC Crash. Source: X$1.9 Billion in Bitcoin ( BTC ) Sold as Market Faces Pressure
The unwind of this trade has resulted in over $1.9 billion in Bitcoin being sold in the past week. Hedge funds that were previously holding positions in CME Bitcoin futures are now closing out their trades, causing CME open interest to decline sharply.
According to Chasse, hedge funds were not betting on Bitcoin’s long-term price increase. Instead, they were using arbitrage to collect short-term yield. Now that this trade is no longer profitable, they are pulling out, further increasing Bitcoin’s 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,”
Chasse explained.
Hedge Funds Exit Bitcoin Arbitrage Trade, Causing Market Free Fall. Source: XTrump’s Tariff Policies and Bybit Hack Weigh on Market Sentiment
Before the cash-and-carry trade unwind was identified, some market participants blamed Bitcoin’s drop on Trump’s new tariff policies. The latest threat of tariffs on the European Union raised concerns about global trade and economic uncertainty.
At the same time, the Bybit hack added to negative sentiment, as security concerns pushed some investors to reduce exposure to centralized exchanges.
Bitcoin’s Key Support Level at $70,000
Analysts note that Bitcoin’s price could find support at $70,000, where a large number of long-term holders may absorb selling pressure. Data from IntoTheBlock shows that 6.76 million addresses hold around 2.64 million BTC, purchased at an average price of $65,296. This zone could act as a key support level.
Bitcoin Holders’ Profitability Distribution at $79,518: In/Out of the Money Analysis. Source: IntoTheBlockThe recent rise in BTC ETF demand was partly influenced by arbitrage strategies rather than long-term investments. With hedge funds unwinding their trades, Bitcoin is going through a period of correction. The market remains volatile as leveraged positions continue to be liquidated.
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