Bloomberg: Bitcoin futures-spot price spread narrows, signaling the end of the Wall Street arbitrage era.

A key arbitrage trade in the cryptocurrency derivatives market is crumbling. The "cash-and-carry trade" strategy, where Wall Street institutions previously bought spot Bitcoin and sold futures to capture the price difference, has seen its annualized return plummet from approximately 17% a year ago to around 4.7% currently, barely covering funding costs, due to a massive influx of funds causing the spread to narrow sharply. As arbitrage profits shrink, the value of open interest in Bitcoin futures contracts on the Chicago Mercantile Exchange has fallen significantly from its peak and has been overtaken by Binance. This primarily reflects a strategic retreat by large US accounts such as hedge funds. Market maturity has given institutions more tools to express directional views, leading to narrowing spreads between exchanges and naturally squeezing arbitrage opportunities. Market analysts point out that the era of near-risk-free, high-return trades may be over, and traders are turning to more complex strategies in decentralized markets. CME Group stated that institutional investors are diversifying from Bitcoin to other tokens such as Ethereum. (Bloomberg)