Hedge funds shift to net long bitcoin futures on CME

Hedge funds trading on the Chicago Mercantile Exchange (CME) have shifted from structural short positions to net long exposure on bitcoin futures. This transition marks a significant departure from the long-standing “basis trade” strategy, where institutional investors would buy spot bitcoin and sell futures to capture yield spreads.

The shift was driven by declining profitability in the cash-and-carry model. As annualized bitcoin futures yields fell to approximately 3%, they dropped below the returns offered by two-year US Treasury bonds, which stood at roughly 3.8%. This compression in margins made maintaining short futures positions unviable due to rising collateral costs and shifting macroeconomic liquidity.

Market analysts note that as the margin compression in these mechanics occurred, institutional desks chose to unwind their short legs entirely rather than scale down capital. This repositioning has contributed to a rally in digital asset derivatives, with bitcoin prices rising above $65,000 after having dipped to $58,000 in early July.