Crypto Market Makers Extract Yield From Bitcoin Rally via Basis Trade
Institutional firms are using cash-and-carry strategies to secure guaranteed returns while neutralizing price risk.
Major cryptocurrency trading firms are leveraging a sophisticated 'cash-and-carry' strategy to generate yield as Bitcoin continues its recent price surge. By neutralizing directional risk, these institutional market makers are extracting profit from the market's inherent leverage rather than speculating on price movements.
Leading firms, including Abraxas Capital, Fasanara Capital, and Wintermute, have deployed significant capital into this basis trade. On the Hyperliquid exchange, these three entities collectively hold short positions totaling 138,569 ETH (approximately $338 million) and 3,425 BTC (approximately $265 million). To execute the trade, the firms hold the equivalent amount of spot assets while simultaneously shorting the same volume via perpetual futures, effectively hedging their exposure to price volatility.
The Mechanics of the Basis Trade
The profitability of this strategy depends entirely on the 'funding rate' of perpetual futures. In a bullish market, traders who hold long positions pay a fee to those holding short positions to ensure the futures price remains aligned with the spot price. When funding rates are positive, the short side of the trade receives a steady stream of payments.
This specific trade had largely disappeared between February and July, a period when funding rates were either compressed or negative. However, as Bitcoin rallied from $62,000 to over $77,000, funding rates flipped firmly positive. According to 21shares Capital Markets, the Bitcoin basis remains "rich," with funding sitting at what the firm characterizes as "standard levels," making the strategy viable once again.
Institutional Risk Management
This activity highlights how institutional players manage risk during periods of high volatility. Instead of betting on whether the market will rise or fall, market makers use the basis trade to secure high single-digit annualized returns. This approach allows them to provide essential liquidity and stability to the broader ecosystem without exposing their balance sheets to sudden price crashes.
By acting as the counterparty to leveraged retail and institutional longs, these firms essentially sell "insurance" against price drops in exchange for the funding fee. This creates a symbiotic relationship where speculators get the leverage they desire, and market makers receive a predictable yield.
Market Outlook
Investors and analysts are now watching whether these funding rates remain elevated as Bitcoin tests new resistance levels. If the rally stalls or turns into a correction, funding rates could compress, reducing the attractiveness of the cash-and-carry trade. For now, the heavy positioning on Hyperliquid suggests that major market makers believe the current bullish sentiment provides a sustainable window for yield extraction.