Bitcoin Price Plunge to $70K Looms as ETF Outflows Surge

Bitcoin's price could potentially plummet to $70,000 if the ongoing sell-offs in Bitcoin ETFs persist, according to Arthur Hayes, co-founder of BitMEX and Chief Investment Officer at Maelstrom. This warning comes as Bitcoin recently hit a three-month low of $88,273, its lowest point since mid-November.

Hayes explained that institutional investors have shifted their focus to spot Bitcoin ETFs like BlackRock's IBIT in search of higher returns. This strategy, known as the long ETF-short futures approach, allows hedge funds to leverage the basis between ETF prices and futures contracts. However, Hayes warned that if this yield basis narrows further, these funds could unwind their positions by selling ETFs and buying back CME futures, triggering a potential price drop for Bitcoin.

This warning aligns with an ongoing trend of outflows from US-based spot Bitcoin ETFs. According to CoinShares, these products recorded outflows totaling $560 million last week due to growing economic uncertainty. This trend has persisted in the new week, with data from Farside showing that spot Bitcoin ETFs collectively experienced $516.41 million in outflows on Feb. 24, marking the second-highest single-day outflow recorded this year.

Fidelity's FBTC led the way in losses, experiencing significant outflows totaling $246.96 million. BlackRock's IBIT followed closely behind, recording $158.59 million in redemptions. Other investment products also witnessed considerable outflows, including Grayscale's GBTC, Invesco Galaxy's BTCO, WisdomTree's BTCW, Bitwise's BITB, VanEck's HODL, and Grayscale's mini Bitcoin Trust.

As the market continues to monitor the situation, investors and traders should remain vigilant and adapt their strategies accordingly. The potential for further price drops in Bitcoin, as warned by Arthur Hayes, underscores the importance of risk management and diversification in today's volatile crypto market.