Crypto Funds Profit From Bitcoin Rally Without Betting on Direction: Basis Trade Yields 9% Annually

As Bitcoin surged from $62,000 to $80,000, professional market participants have ramped up the classic market-neutral strategy known as cash-and-carry (basis arbitrage). Major trading firms, including Abraxas Capital, Fasanara Capital, and Wintermute, have opened short positions in BTC and ETH on the decentralized platform Hyperliquid totaling over $600 million, fully hedging them with actual spot assets to earn 7–9% annual returns.

How Basis Trade Works: $600M in Shorts Generating Steady Income

Despite the substantial bearish positions, these funds are not betting on a market crash.

According to CoinDesk, citing on-chain analytics from Lookonchain, the combined portfolio of the three market makers on Hyperliquid is distributed as follows:

• 138,569 ETH in short positions (approximately $338 million);
• 3,425 BTC in short positions (approximately $265 million).

Meanwhile, Abraxas Capital has withdrawn spot 73,872 ETH (approximately $173 million) from Binance, as confirmed by Arkham Intelligence’s on-chain tracking.

The strategy involves simultaneously buying physical cryptocurrency on the spot market and opening an equivalent short position in perpetual futures. When the price fluctuates, losses on one instrument are fully offset by gains on the other, while net income comes from the funding rate.

During bull rallies, retail traders heavily buy leveraged futures, pushing the funding rate positive: derivatives buyers (longs) pay interest every 8 hours to sellers (shorts) holding the opposite side of the trade.

Returns Back to 9% Annually After $3B in Liquidations

The strategy’s appeal hinges on crowd sentiment. For much of the first half of the year, after BTC pulled back from its peak of $120,000, the funding rate hovered near zero or turned negative, making arbitrage unprofitable.

The August rally changed that: Bitcoin’s 25% weekly gain triggered a cascade of liquidations of bearish positions totaling over $3 billion (a short squeeze). The freed-up space was quickly filled by new leveraged buyers, restoring the risk premium.

According to data from the Aegis platform:

• The 30-day average funding rate for BTC perpetual contracts rose to 6.7% annually;
• The 7-day return reached 8.7% annually;
• On some exchanges, the base rate of 0.01% per 8-hour interval generates up to 10.95% annually before reinvestment.

For institutional capital of $100 million, maintaining such a position yields approximately $8 million in gross profit per year, with minimal dependence on trend direction.

Arbitrage on CME and the Ethereum Market

Similar strategies are playing out on regulated US venues. According to Glassnode analytics, open interest in Bitcoin futures on the Chicago Mercantile Exchange (CME) rose from 87,000 to 122,000 BTC over the past month. Funds are combining purchases of spot Bitcoin ETF shares with selling CME futures, capturing the spread between the markets.

Meanwhile, analysts at CryptoQuant have spotted a rare anomaly: some institutional funds on CME have flipped to a net long position in futures for the first time, signaling the emergence of direct directional bets on further upside for digital gold.

Activity in the Ethereum market has also peaked, with open interest in derivatives on the second-largest cryptocurrency surpassing $14 billion, and the elevated basis spreading to the Solana ecosystem.

Risks and Market Signals

While the cash-and-carry strategy is considered one of the most conservative in the crypto industry, it is not entirely risk-free:

• Floating rate: if euphoria cools, the funding rate can quickly drop to zero or turn negative;
• Liquidity and leverage: during sharp price squeezes, insufficient margin on the futures sub-account risks forced liquidation of the short before the spot hedge is locked in;
• Smart contract risk: operating on decentralized DEXs carries the risk of protocol hacks.

At the same time, a sharp rise in the funding rate has traditionally served as an indicator of market overheating: if Bitcoin’s price stalls at $80,000–81,000, the accumulated volume of leveraged positions could trigger a wave of sell-offs (long squeeze).