• bitcoinBitcoin (BTC) $ 84,042.00 1.36%
  • ethereumEthereum (ETH) $ 1,936.30 2.39%
  • tetherTether (USDT) $ 0.999876 0.01%
  • xrpXRP (XRP) $ 2.35 1.42%
  • bnbBNB (BNB) $ 623.93 3.74%
  • solanaSolana (SOL) $ 128.85 1.21%
  • usd-coinUSDC (USDC) $ 0.999888 0%
  • cardanoCardano (ADA) $ 0.720264 2.72%
  • dogecoinDogecoin (DOGE) $ 0.173811 2.84%
  • tronTRON (TRX) $ 0.220038 3.38%
  • bitcoinBitcoin (BTC) $ 84,042.00 1.36%
  • ethereumEthereum (ETH) $ 1,936.30 2.39%
  • tetherTether (USDT) $ 0.999876 0.01%
  • xrpXRP (XRP) $ 2.35 1.42%
  • bnbBNB (BNB) $ 623.93 3.74%
  • solanaSolana (SOL) $ 128.85 1.21%
  • usd-coinUSDC (USDC) $ 0.999888 0%
  • cardanoCardano (ADA) $ 0.720264 2.72%
  • dogecoinDogecoin (DOGE) $ 0.173811 2.84%
  • tronTRON (TRX) $ 0.220038 3.38%
  • bitcoinBitcoin (BTC) $ 84,042.00 1.36%
  • ethereumEthereum (ETH) $ 1,936.30 2.39%
  • tetherTether (USDT) $ 0.999876 0.01%
  • xrpXRP (XRP) $ 2.35 1.42%
  • bnbBNB (BNB) $ 623.93 3.74%
  • solanaSolana (SOL) $ 128.85 1.21%
  • usd-coinUSDC (USDC) $ 0.999888 0%
  • cardanoCardano (ADA) $ 0.720264 2.72%
  • dogecoinDogecoin (DOGE) $ 0.173811 2.84%
  • tronTRON (TRX) $ 0.220038 3.38%
  • bitcoinBitcoin (BTC) $ 84,042.00 1.36%
  • ethereumEthereum (ETH) $ 1,936.30 2.39%
  • tetherTether (USDT) $ 0.999876 0.01%
  • xrpXRP (XRP) $ 2.35 1.42%
  • bnbBNB (BNB) $ 623.93 3.74%
  • solanaSolana (SOL) $ 128.85 1.21%
  • usd-coinUSDC (USDC) $ 0.999888 0%
  • cardanoCardano (ADA) $ 0.720264 2.72%
  • dogecoinDogecoin (DOGE) $ 0.173811 2.84%
  • tronTRON (TRX) $ 0.220038 3.38%
image-alt-1BTC Dominance: 58.93%
image-alt-2 ETH Dominance: 12.89%
image-alt-3 BTC/ETH Ratio: 26.62%
image-alt-4 Total Market Cap 24h: $2.51T
image-alt-5Volume 24h: $144.96B
image-alt-6 ETH Gas Price: 0.52 Gwei
•LIVEClick here for more Details
 

MORE FROM SPONSORED

LIVE Web3 News

 

ARTICLE INFORMATION

BTC Hedge Fund Liquidation

BTC Hedge Fund Liquidation: How It’s Impacting Bitcoin’s Price

https://icn.live/wp-content/uploads/2025/02/BTC-Hedge.mp3
  • by ICN.live
Khaled Darwish Khaled Darwish

The recent BTC hedge fund liquidation is shaking the cryptocurrency market.

Bitcoin’s price has dropped sharply due to institutional sell-offs. Hedge funds are exiting a once-profitable arbitrage strategy that supported Bitcoin’s stability. Now that the trade is no longer viable, the market is feeling the effects.

The Impact of BTC Hedge Fund Liquidation

For months, hedge funds profited from an arbitrage trade using Bitcoin spot ETFs and CME futures. They purchased ETFs from firms like BlackRock while shorting Bitcoin futures. This approach generated steady returns, sometimes reaching an annualized rate of 5.68%. However, this strategy relied on Bitcoin futures staying at a premium. Recent market weakness erased that premium, making the trade unprofitable. Funds are now rapidly closing positions, creating immense selling pressure.

Bitcoin’s Volatility and Market Uncertainty

The rapid unwinding of these positions has significantly impacted Bitcoin. Over $1.9 billion worth of Bitcoin was sold in a single week. CME open interest has plummeted as hedge funds exit their trades. The same trade that stabilized Bitcoin’s rise is now accelerating its decline.

This event highlights an important truth. Hedge funds were never long-term Bitcoin supporters. They participated only to exploit price inefficiencies and earn quick profits. Now that the trade has collapsed, they are pulling liquidity at a rapid pace. This withdrawal is leaving Bitcoin exposed to extreme volatility.

ANOTHER MUST-READ: MicroStrategy Stock Decline: Bitcoin Volatility Impacts Company’s Performance

Moving forward, Bitcoin must find true long-term investors. These are buyers who want to hold Bitcoin rather than profit from short-term trades. If new investors do not step in, Bitcoin’s price could continue to experience sharp fluctuations. The market remains fragile as liquidations persist. Stability will depend on how quickly real demand replaces the hedge fund exits.

This crash serves as a lesson. Bitcoin ETFs attracted capital, but much of it was for arbitrage. This artificial demand has now disappeared. Until organic buyers replace this lost liquidity, Bitcoin will remain vulnerable to further swings.

Although liquidations may not be over yet, the end of this cycle will bring stability. Once hedge funds fully exit, Bitcoin may start recovering. New demand sources will need to emerge for the market to rebuild confidence. Until then, volatility will remain a dominant theme, and investors should prepare for continued uncertainty.

Click here for more Details

SHARE

What is BTC hedge fund liquidation and why is it happening?

BTC hedge fund liquidation refers to the mass selling of Bitcoin by hedge funds as they exit specific trading strategies. Many funds had been utilizing a cash-and-carry arbitrage trade, buying BTC spot ETFs while shorting Bitcoin futures to earn low-risk yield. However, with market weakness, the futures premium collapsed, making the trade unprofitable. As funds close their positions, massive sell-offs occur, leading to increased volatility and price drops. This process is a liquidity-driven event, where leveraged positions unwind rapidly, impacting Bitcoin’s stability in the short term until real buyers step in to absorb the excess selling pressure.

How does BTC hedge fund liquidation impact Bitcoin’s price?

When hedge funds liquidate their BTC holdings, they create significant selling pressure, driving the price downward. Since many of these funds used leverage, their positions get forcefully closed if the market moves against them, leading to a cascading effect. In recent cases, BTC has dropped double digits within days due to hedge funds unwinding trades that were no longer profitable. The result is heightened volatility, as forced liquidations trigger further sell-offs. Until organic demand returns, BTC may remain unstable. However, once the hedge fund exits are complete, Bitcoin could recover as it finds a new equilibrium.

Are BTC hedge fund liquidations common, and what triggers them?

BTC hedge fund liquidations occur periodically, especially when hedge funds rely on arbitrage or leveraged positions. Common triggers include rapid shifts in market sentiment, changes in macroeconomic conditions, or breakdowns in previously profitable strategies. The recent wave of liquidations was driven by the collapse of the cash-and-carry trade, where funds could no longer profit from futures premiums. Additionally, sudden drops in Bitcoin’s price can trigger margin calls, forcing funds to sell off assets to cover losses. While these liquidations are disruptive, they are part of Bitcoin’s cyclical nature and often signal a reset before future stability.

What happens to Bitcoin after a hedge fund liquidation event?

After a hedge fund liquidation event, Bitcoin typically undergoes a period of high volatility before stabilizing. The excess supply from forced sales needs to be absorbed by real buyers—long-term investors who believe in BTC’s value. Historically, similar liquidation-driven crashes have led to short-term price declines but were followed by recovery once selling pressure subsided. In the long run, such events can cleanse the market of unsustainable leverage, creating a stronger foundation for organic growth. However, if institutional interest remains weak, Bitcoin may struggle to regain momentum until confidence and demand return to pre-liquidation levels.

FEATURED

EVENTS

Image for: TOKEN49 Dubai April 2025Click here for more Details
43 Days
2 Hr
14 Min
45 Sec
 

ICN TALKS EPISODES