The annualized premium in bitcoin futures on the CME has dropped to 4.3%, the lowest since October 2023, indicating reduced institutional interest. This decline in futures premium, alongside negative funding rates in perpetual futures, suggests bearish sentiment and diminished hedge fund arbitrage activities. Despite BTC's price maintaining above $100,000, the shrinking basis reflects uncertainty about future price potential. The situation is compounded by low retail participation, and the basis rates have fallen significantly below the 10% threshold typically attractive to arbitrage-focused hedge funds. This shift may indicate a transition towards directional investment trends rather than arbitrage strategies within the Bitcoin ETF space. The decrease in funding rates also mirrors a retreat in speculative interest, with regulated venues indicating aggressive institutional hedging without corresponding ETF demand, as evidenced by the deeply negative CME-to-spot basis ratios for both Bitcoin and Ethereum.

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