Bitcoin carry trade hits 7.89% as ETF inflows top $865 million

Bitcoin futures carry reached 7.89% on Aug. 7, topping the 4.19% two-year Treasury yield and ending a 157-day stretch below government debt.

The reading comes from matched-date CME settlement data and the 4 p.m. ET New York Bitcoin benchmark of $64,880, according to the CME daily bulletin and the official Treasury yield curve. The August contract settled at $65,175, producing a gross annualized basis of 789 basis points, while September and December contracts showed 625 and 569 basis points, respectively.

The flip lands as US spot Bitcoin ETFs recorded $865 million of net inflows in the week ended Aug. 7, with positive flows in every session. BlackRock's IBIT took roughly $694 million of that, about 80 percent, according to Farside Investors data.

The spread matters because it determines whether arbitrage desks rotate capital from fixed income into Bitcoin cash-and-carry positions — buying spot and shorting futures to capture the premium as prices converge. A Bank for International Settlements study found one-month CME Bitcoin carry exceeded 20 percent at points in 2021, while documenting financing, leverage, margin and liquidation risks that can interrupt a position before convergence.

The carry trade's fine print

The gross spread flatters the trade. Financing the spot leg, margin, fees and execution on both sides all take a cut before a desk keeps anything. A small net spread can push capital elsewhere even as institutions continue buying Bitcoin for other reasons.

Analyst Marc Baumann had put annualized Bitcoin futures basis near 3 percent and the two-year Treasury yield at 3.8 percent, saying the crypto spread had trailed the government benchmark for 157 consecutive days. The Aug. 7 observation falls inside that window, breaking the streak calculated from comparable CME and BRRNY inputs. Baumann's thread did not disclose its venue, tenor, roll rule or net-cost series.

ETF flows and positioning

The weekly ETF total records money entering the products but cannot show how much spot exposure was paired with short futures. CFTC trader categories aggregate positions by participant type yet do not identify the spot or ETF hedge behind a futures short.

CME data showed hedge funds turned net long Bitcoin this month for the first time in years, according to BeInCrypto. Historically, those funds ran net short futures, the classic footprint of carry desks hedging spot and ETF holdings.

Returning cash-and-carry demand should leave three observable traces: the futures basis clearing a funding benchmark matched to the contract horizon after costs, persistent ETF net inflows as the spread widened, and greater use of short futures in CME open interest and trader positioning.

Bitcoin traded near $63,930, up 0.3 percent over the past day, as of 16:50 UTC. Wednesday's July CPI print could move both sides of the ledger, with the 30-year Treasury yield already touching 5.27 percent, its highest since 2007.

This article is for informational purposes only and does not constitute investment advice.