Bitcoin Futures Carry Trade Collapses Below Treasury Yields for Longest Stretch in Years

Bitcoin futures, once a reliable source of outsized returns for carry traders, have delivered lower yields than short-term US Treasuries every month since February. During the 2021 bull market, the popular cash and carry strategy, which involves shorting bitcoin futures while holding spot exposure through an ETF, regularly returned more than 20%. Today that same trade yields roughly 3%, compared with an average 3.8% return on two-year Treasury notes.

According to data from Glassnode, the three month futures basis has trailed the two year Treasury yield for 157 consecutive days, the longest such stretch on record apart from an eight-month period spanning August 2022 to January 2023, which ultimately marked the bottom of that market cycle.

Falling Yields Discourage Capital Deployment

With the carry trade now paying less than parking money in government bonds, traders have less incentive to allocate capital toward futures positions. This has contributed to a sharp drop in trading activity, with July futures volume falling to just over $880 million, down significantly from a peak of $1.47 trillion in February.

Shrinking Yields Reflect a Maturing Market

Rather than signaling weakness, the declining basis is viewed by analysts as a sign of a more efficient bitcoin market, with narrowing price discrepancies between futures and spot markets leading to tighter spreads, easier hedging and fewer large arbitrage opportunities.