Bloomberg: Wall Street firms are withdrawing from Bitcoin arbitrage trading

According to Bloomberg, a key arbitrage trade in the cryptocurrency derivatives market is unraveling. Wall Street institutions previously employed a "cash-and-carry trade" strategy by buying spot Bitcoin and selling futures to capture price differences. However, due to a surge of funds, the price difference has narrowed sharply, with the annualized return dropping from about 17% a year ago to around 4.7% now, barely covering the cost of capital.

As arbitrage profits shrink, the value of open contracts for Bitcoin futures on the Chicago Mercantile Exchange has significantly declined from its peak and has been surpassed by Binance. This mainly reflects a strategic withdrawal of large U.S. accounts such as hedge funds. The maturation of the market has provided institutions with more tools to express directional views, which has naturally compressed the arbitrage space as price differences between exchanges narrow.

Market participants point out that the era of nearly risk-free high returns may be over, and traders are turning to more complex strategies in decentralized markets. CME Group indicates that institutional investors are diversifying from Bitcoin to other tokens like Ethereum.