Hedge funds have reduced their net short positions in CME Bitcoin futures by 89% since December 2024, as declining arbitrage returns prompt institutional investors to unwind one of the cryptocurrency market's most popular trading strategies, according to a report published on TradingView.
Leveraged funds held a net short position of 2,591 CME Bitcoin futures contracts, equivalent to approximately 12,955 BTC, as of 3 November 2026. This represents the smallest net short exposure since February 2023, reflecting a significant reduction in the basis trade, which involves buying spot Bitcoin or exchange-traded funds (ETFs) while simultaneously selling futures contracts at a premium.
The retreat has been driven by a narrowing futures premium, with the annualised CME Bitcoin basis falling to approximately 4.8%. At this level, returns offer little additional compensation over US Treasury yields, reducing the appeal of a strategy that involves financing costs, margin requirements and exposure to cryptocurrency market volatility.
Major multistrategy hedge funds, including Millennium Management and Brevan Howard, have also reduced their spot Bitcoin ETF holdings. Nine hedge funds collectively cut exposure by approximately 68,000 BTC between September 2025 and June 2026, representing around $5.4bn in holdings.
Trading activity on CME has also declined, with Bitcoin futures open interest falling to approximately 17,527 contracts, equivalent to 87,635 BTC, by early November. In August, leveraged funds briefly shifted to a net long futures position for the first time, marking a departure from their historically short-biased positioning.
The unwind highlights how declining arbitrage opportunities are reshaping institutional participation in cryptocurrency markets. It also complicates the interpretation of Bitcoin ETF flows, as purchases and redemptions associated with market-neutral basis trades do not necessarily reflect directional investor sentiment.
A renewed widening of the futures premium could restore the strategy's appeal, although current market conditions suggest hedge funds are increasingly favouring less complex sources of yield.
