Bitcoin (BTC) Price Could Drop to $70,000 as Hedge Funds Unwind ETF Positions, BitMEX Co-Founder Arthur Hayes Warns

Blaming Trump's tariff policy changes, BitMEX co-founder Arthur Hayes warns that Bitcoin could drop to $70,000 as hedge funds unwind their positions.

Fresh bloodbath on Satoshi Street, with little hope of recovery.

Bitcoin’s relentless price decline continued on Feb. 24, dropping below $90,000 after major investors withdrew a record amount from U.S. spot Bitcoin exchange-traded funds (ETFs).

According to data from証券情報会社クアンタムエコノミクス, a major U.S. spot Bitcoin ETF saw an outflow of $517 million on Thursday, the largest in seven weeks. This marks the fifth consecutive day of withdrawals, with BlackRock’s iShares Bitcoin Trust (IBIT) losing $159 million and Fidelity’s Wise Origin Bitcoin Fund seeing $247 million in outflows. Other funds like Bitwise, Invesco, and Grayscale also saw large withdrawals.

As a result, Bitcoin’s price dropped more than 5% to $91,000, then fell further to $89,175, dropping by 2.25% in the last hour.

panicking over trump's tariff policy changes, BitMEX co-founder Arthur Hayes has warned that Bitcoin could drop to $70,000 as hedge funds unwind their positions.

Many of these funds simultaneously invested in Bitcoin ETFs and bet against Bitcoin futures on the Chicago Mercantile Exchange (CME). This strategy, known as a “basis trade,” allowed them to earn profits with minimal risk by exploiting the price gap between spot Bitcoin ETFs and futures contracts.

However, as Bitcoin’s price falls, hedge funds are seeing their profits dwindle and are now exiting by selling their ETF shares and buying back their CME futures. Hayes expects this to continue during U.S. trading hours, putting further pressure on Bitcoin’s price.

Bitcoin could drop to $70,000, warns Hayes

According to Hayes, this selling could drive Bitcoin down to $70,000. When hedge funds exit a market en masse, it creates a chain reaction — more selling leads to lower prices, which forces other funds to follow suit, making the decline even steeper.

Markus Thielen of 10x Research points out that much of the demand for Bitcoin ETFs was driven by hedge funds engaging in this arbitrage trade, rather than long-term investors. Now that these funds are pulling out, Bitcoin’s price is reacting to the sudden lack of demand.

If the futures premium continues to narrow, more funds could be forced to sell their ETF shares and cover their short futures positions, driving Bitcoin even lower.

Bitcoin at a turning point

Bitcoin surged past $100,000 after Trump's election victory, fueled by hopes of a Bitcoin strategic reserve. However, with ETF investors exiting and hedge funds unwinding their trades, Bitcoin is struggling to maintain its strength.

If new buyers don't step in, Hayes' warning of Bitcoin dropping to $70,000 could become a reality. The market is now eagerly awaiting the next batch of ETFs to enter the market and inject fresh capital into the system to help it recover from this downmarket.