Why are ETFs losing their purchasing power? In the previous tweet, we mentioned that MSTR and ETFs are the core forces that continue to provide new demand for BTC in this cycle, and they are also important supports for the price to continue to rise (see citation). Although MSTR announced the purchase of 10624 BTC again on December 9th, both in terms of frequency and scale, the level of positivity has significantly slowed down compared to the third quarter of 2024 to early 2025. Recently, the performance of ETFs has been even weaker. This fully demonstrates that in the current macro context, traditional capital's attitude towards BTC is becoming more hesitant and cautious, and overall risk appetite is declining. In addition, there is another equally important but easily overlooked reason - basis convergence. The funds for purchasing ETFs can be roughly divided into two categories: 1. Directional funds: Simply replacing holding BTC directly through spot ETFs is essentially bullish on BTC; 2. Hedge arbitrage funds: While buying spot ETFs, short BTC futures on CME to earn basis returns. When market risk appetite decreases, the first type of funds will naturally decrease; When the basis continues to converge and the arbitrage yield decreases, the second type of funds will gradually withdraw. (Figure 1) Taking Binance's 3-month futures annualized rolling basis as an example, in March 2024, the peak yield of the basis reached 25% (30D SMA) at one point; In December 2024, it will rise again to about 15%; Currently, it is only 4.7%. In a typical bull market, a high base spread often means that market bulls are willing to buy forward contracts at a higher premium and use them as leverage tools. And if the basis continues to decline, it reflects a synchronous decline in bullish sentiment, risk appetite, and willingness to leverage. In this context, the market has gradually entered a negative feedback loop: Decline in Long Intention → Convergence of Basis → Withdrawal of Arbitrage Funds → Decrease in ETF Purchasing Power → Pressure on BTC Price → CME Hedging Short Orders to Take Profit → Sell Spot under Hedging Structure → Further Decline in Long Intention (Figure 2) Therefore, in the comparison between Figure 1 and Figure 2, we can see that the red shaded area indicates an increase in basis, corresponding to a significant net inflow of ETF; The green shaded area shows a decrease in basis, corresponding to sustained net outflows of ETFs. How can we break this cycle? In the short term, it is not easy. It requires the market to have clearer macro expectations, increased risk appetite, new demand entering the market, stronger bullish willingness, and money will naturally come in. ---------------------------------------------- This article is sponsored by @ Bitget | Bitget VIP， Lower rates and more generous benefits