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Bitcoin’s price turbulence is set to continue until genuine long-term investors step in, rather than traders exploiting arbitrage opportunities, according to crypto venture capitalist Kyle Chasse.
In a Feb. 27 post on X, the Master Ventures founder emphasized that Bitcoin’s recent volatility is a byproduct of liquidity-driven trading rather than organic demand. “ETFs didn’t just bring in long-term holders — they brought in hedge funds running short-term arbitrage,” Chasse noted.
4/ Why is this happening?
— Kyle Chassé / DD🐸 (@kyle_chasse) February 27, 2025
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.
Hedge Funds Exploiting Bitcoin’s Price Gap
For months, hedge funds have been leveraging a low-risk yield trade by capitalizing on the difference between Bitcoin spot ETFs and CME futures. This strategy, known as the cash and carry trade, involves profiting from the premium of futures contracts over spot prices. However, as Bitcoin’s price tumbled, this premium collapsed, making the trade unprofitable and triggering liquidations.
Chasse underscored that hedge funds were never betting on Bitcoin’s long-term value. Instead, they sought predictable, low-risk returns. “Hedge funds don’t care about Bitcoin,” he remarked, suggesting that the mass exodus of these traders is exacerbating market instability.
Market Sentiment and Bitcoin’s Price Decline
Echoing similar concerns, 10x Research head Markus Thielen pointed out that as crypto sentiment weakened, funding rates plunged, forcing hedge funds to unwind their trades. The resulting liquidity crunch has left Bitcoin vulnerable to further declines.
Bitcoin recently fell below $80,000 for the first time since November, following Donald Trump’s reelection. At the time of writing, Bitcoin was trading at $79,532, according to TradingView data.
Swyftx lead analyst Pav Hundal noted that while further downside is possible, most of the shakeout may have already played out. “It is entirely likely that we see Bitcoin test lower at this point, but it is likely that most of the damage has been done,” he stated.
Also Read: XRP Price Crashes 13% as Bitcoin Dips Below $91K – Is a Drop to $1.65 Next?
Looking ahead, upcoming U.S. inflation data on Feb. 28 could provide a catalyst for market recovery if it comes in lower than expected. However, as hedge funds pull liquidity, Bitcoin remains in a precarious position, awaiting real organic buyers to stabilize its price action.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
