BIT: Funding rate falls below SOFR, reducing the attractiveness of bitcoin basis trading

Foresight News reports that BIT tweeted, "Unlike in 2022, during this round of Bitcoin's downward cycle, crypto hedge funds can no longer reliably earn arbitrage profits from spot-futures basis trading as they once did. This strategy typically involves buying spot and selling futures to capture the price difference between them. Previously, after deducting SOFR-based financing costs, such unleveraged strategies could achieve an annualized return of 5%–10%. However, as interest rates have risen and retail participation in futures trading has decreased, the related premium has continued to narrow."

Data also confirms this change: Currently, Bitcoin's annualized funding rate is about 2.9%, lower than SOFR's 3.7%. This means the spread between the funding rate and SOFR has turned negative since February 2026. This trend can be traced back to February 2025, when retail participation started to decline. As arbitrage returns decrease, some crypto hedge funds may choose to adopt a wait-and-see approach, while others may face redemption pressure."