Author: Leo Jakobson Source: thedefiant Translation: Shan Oppa, Golden Finance

Master Ventures co-founder Kyle Chassé said that hedge funds used to stabilize Bitcoin's rise to arbitrage strategies, which have been used to stabilize Bitcoin's rise, have now exacerbated market volatility as they withdraw.

This time Bitcoin's "blood swamp" is not an ordinary bull market adjustment, but the power of Wall Street has fueled the fire. Chassé pointed out that the culprit is "cash and carry trade", an arbitrage strategy that exploits mispricing between underlying assets and their derivatives.

Specifically, hedge funds buy bitcoin through spot ETFs and short bitcoin futures on the CME exchange, earning the spread from it, with an annualized rate of return of about 5.68%. This is a low-risk, high-yield arbitrage transaction that hedge funds have used for months.

"This transaction relies on the premium of Bitcoin futures to the spot market," Chassé explained, "but with the recent market weakness, this premium has disappeared, resulting in an unprofitable arbitrage transaction. Funds are being withdrawn on a large scale, and Bitcoin sell-off pressure soared."

Bitcoin ETF funds outflowed last week as of $2.7 billion, according to SoSoValue data.

Chassé further pointed out that CME futures open contracts are "pulsing" as funds close positions one after another. “The same arbitrage trading that once supported Bitcoin’s rise, has accelerated its decline.” CME data shows that open interest has dropped by about $3 billion since February 20.

Chassé believes that the fundamental reason for this phenomenon is that hedge funds do not bet on the surge in Bitcoin prices, but only use arbitrage to earn profits. Now that the strategy has failed, funds have withdrawn, and the market has collapsed.

Kevin Oakeson, CEO of Hummingbird Tokenized Marketing Rewards Company, also said: "People have expected Bitcoin to enter the mainstream market, but this is also the case.Bringing Wall Street participation. Like it or not, a single Wall Street institution has more assets than the entire crypto market, and their strategies are extremely savvy. ”

Chassé believes that market volatility will not stop until all leveraged positions are liquidated. "Bitcoin needs to find real organic buyers, not just hedge funds chasing returns. ”