Wall Street pulls back from Bitcoin arbitrage as returns sink to multi-year lows

The cash-and-carry arbitrage that used to be a goldmine for big desks is now barely hanging on. This was the play where companies would buy Bitcoin on the spot market and short it on the futures side, locking in the price difference as profit.

For a while, it was the go-to move. But that’s not the case anymore. The trade is getting crushed by low yields, tighter spreads, and shrinking interest from U.S. institutions.

Bitcoin futures open interest on the Chicago Mercantile Exchange (CME) has dropped below Binance for the first time since 2023.

Wall Street used to favor CME for this trade, especially after spot Bitcoin ETFs got approved in early 2024. But the more they jumped in, the worse the returns got. Everyone crowding into the same trade killed it. Now it barely covers basic costs like funding and execution.

CME volumes slump while Binance holds firm in futures

The returns that once hit double digits have now crashed. One-month annualized yield from the strategy sits around 5%, which is one of the lowest points in years.

“It was 17% this time last year,” said Greg Magadini, who tracks derivatives at Amberdata, adding that it’s now closer to 4.7%. That barely beats one-year Treasuries, which offer about 3.5%. It’s not worth the risk anymore, especially for funds that aren’t here for crypto gains, just stable returns.

CME’s Bitcoin futures open interest has fallen hard, from more than $21 billion at its peak to just under $10 billion. Meanwhile, Binance is sitting steady at around $11 billion, based on Coinglass data. It’s not that institutions have totally dumped crypto. It’s that U.S. hedge funds and big accounts are stepping back from this specific trade after Bitcoin prices topped out in October 2025.

Instead of regular futures, traders are now leaning toward perpetual futures, or perps. These are contracts with no expiry, and they settle and price continuously throughout the day. Binance dominates this space. They pull the largest volumes in the crypto world.

CME tried to catch up in 2025 by launching smaller and longer-term futures contracts, some that can even be held up to five years, but the volumes still don’t compare.

“CME has historically been the venue of choice for institutions and cash and carry arbitrage,” said James Harris, CEO of Tesseract, a digital asset firm. But now that Binance is overtaking it, he sees it as a “tactical reset.” Not a full exit from crypto, but a reaction to thin profits and low liquidity.

A note from CME Group said 2025 marked a key turning point. As regulation got clearer, big investors started looking beyond Bitcoin, into Ether, XRP, and Solana. “We averaged around $1 billion in daily notional OI for Ether in 2024, and in 2025 that number increased to almost $5 billion,” CME noted.

Even though Federal Reserve rate cuts have lowered borrowing costs, they haven’t sparked any big bounce in crypto. Since the October 10 crash, demand for borrowing is weak. DeFi yields are low. Traders are hedging more and using less leverage.

Le Shi from Auros, a Hong Kong market maker, said the market now gives players more tools, like ETFs and direct exchange access, to bet on price direction. That competition cuts into price gaps between venues, which kills arbitrage.

“There’s a self-balancing effect,” Le said. As traders look for the cheapest place to trade, spreads close up, and cash-and-carry trades stop making sense.

That’s pushed firms like 319 Capital to ditch the easy profits and start hunting for more complicated strategies. Their CIO, Bohumil Vosalik, said the party’s over. The market now belongs to those ready to dig deeper.

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