Behind the 2025 Bitcoin candlestick are quiet changes in collateral, basis, and ETF flows.
Funding rates, margin haircuts, and spot ETF hedging now have just as much impact on prices as macroeconomic headlines.
Collateralization across futures and lending venues affects the spot price of Bitcoin through forced hedging and liquidation. This relationship resurfaced during the October restructuring, with around $19 billion of positions liquidated between October 10 and 11 as capital and infrastructure were compressed and reset.
October Funding, Collateral, and ETF Flow Review
Since mid-September, exchanges have also adjusted funding methods and collateral parameters, and changed carry economics and clearing standards for margin trading. Macro hurdles to carry have lowered after the Federal Reserve cut interest rates in late October, pushing the three-month rate toward about 3.8%.
ETF and ETP flows also fluctuated during October, going from record inflows to outflows and back again, which impacted spot inventories and dealer hedging flows.
But that October pattern has already reversed again. By early November, CoinShares data shows digital asset funds experiencing new net outflows, led by nearly $1 billion from Bitcoin ETFs, highlighting how quickly ETF hedging flows can change direction.
The mechanism is simple. As perpetual or futures premiums widen, basis traders buy spot and short P/E or listed futures to lock in the spread. This will withdraw coins from exchanges, tightening static liquidity and increasing cash balances.
When funding turns negative and basis is compressed, spot selling and permanent short-term covering unwind the same books, adding inventory to exchanges and putting pressure on prices. Funding is tied to the PERP premium over the underlying index and is settled at regular intervals.
As of late October, the medium-term annualized rate of March BTC futures was hovering around 6-6.5%, which was several hundred basis points higher than the three-month contract.
How stricter foundations, funding and haircuts translate to spots
That recovery has since tapered off, with the March base now approaching mid-5% territory, only about 150-200bps above the note, but still enough to keep carry capital engaged as long as borrowing costs are contained and collateral haircuts remain unchanged.
Funding and haircuts determine how much leverage that spread can support. According to Aavescan, the cost of borrowing in DeFi remains low in some areas, with Aave v3 WBTC borrowing close to 0.2%, and utilization rates are low.
In centralized venues, margin borrowing rates for BTC and stablecoins can vary widely, potentially eroding or increasing net carry. Haircut and portfolio margin settings determine how far a position can grow before maintenance margin is triggered.
Venues have been making such adjustments throughout September and October as changes in collateral ratios or funding clamps move liquidation bands closer or further away from the spot.
Clearing and insurance funds act as catalysts. Maintenance margin calculations can force liquidations on small percentage movements at high leverage, with insurance funds absorbing losses until a threshold is reached.
In the previous episode in 2023, dYdX utilized approximately $9 million from the v3 insurance fund to absorb losses in the YFI market and the balance remained, demonstrating how these buffers dampen deleveraging pressure rather than remove it.
The October 10-11 cascade demonstrated how PERP leverage can quickly spill over into the cash market when positions are forced out.
Liquidity background: exchange reserves, depth and holding capacity
On the other side, exchange reserves and depth shape how these flows are affected. CryptoQuant’s dashboard shows that net outflows from Bitcoin exchanges have reached extreme levels over the past three years, with outflows continuing to hit multi-year lows in foreign exchange reserves in October.
This reduction in supply for sale occurs when basis withdraws coins from the venue and is fed back when the unwinding of that flow is reversed.
According to Kaiko, previous depth research pegged 1% of BTC’s market depth at approximately $500 million, which provides a useful baseline for how a $1 billion basis-driven spot bid would traverse multiple buckets in a single day if passive liquidity recedes.
Carry short-leg capacity remains available in regulated venues, with CME reporting record crypto futures open interest and volume as of late October.
Carry math helps frame joins. A simple delta neutral template is: Net carry is equal to the annualized basis minus financing costs, fees and slippage, and the annual percentage rate borrowed.
For example, if the medium-term basis is 6.3% (about where March traded in late October) and the bill rate is 3.8%, the cash-funded book yields about 2.5% before frictions are taken into account. If a desk were to raise funds with an exchange stablecoin and borrow at 3-6%, the same spread could be close to zero, or even negative once fees are taken into account.
According to ApeX, for PERP, 8-hour funding is annualized at 3x and then 365x, so an 8-hour rate of 0.01% is approximately 11% annually.
How Collateral, Basis, and ETF Flows Drive Bitcoin Spot Price
Haircuts map directly to leverage. If effective leverage varies with the sum of haircuts applied to initial margin and collateral, a 5-10 percentage point increase in the haircut can reduce available leverage by approximately 10-20%, increasing liquidation risk and forcing flows to be de-risked even if prices do not change.
ETP and ETF activity is the other valve. CoinShares reported $5.95 billion in inflows for the week ending Oct. 4, $513 million outflows for the week of Oct. 20, and $921 million inflows for the week of Oct. 27, which led to changes to dealer hedging requirements and spot bidding within days.
When these flows become positive despite a wide basis, carry desks compete with ETF creation to raise coins and exchange balances tend to decline. When flows reverse or funding turns negative, unwinding increases reserves and pushes prices toward liquidation clusters.
Three paths will be important for Spot over the next month.
- If the basis expands to 8-12% over multiple sessions, the carry desk will typically add a long spot and short PERP or CME. This will deplete your exchange balance and keep your funds positive until new inventory arrives.
- If the basis compresses below 3% and ETF flows turn negative within a few days, the unwinding will push spot supply back onto exchanges, concentrating pressure around the maintenance margin band.
- Even in the absence of macroeconomic changes, haircuts and portfolio margin updates can provide faster risk aversion as collateral values fall, effective leverage declines, and the same price range triggers liquidations.
These results depend on where the spread is relative to bill interest rates, borrowing costs, and the direction of ETF flows.
3 real-time gauges to predict Bitcoin’s next move
Look at the three gauges for real-time context.
- More than one or two days of annualized returns above 8% on medium-term tenors often attract new carry demand.
- CoinGlass’ heat map shows that funding is broadly negative across major companies, with spot selling and reserve restructuring occurring as basis books ease.
- Support Center posts regarding collateral ratio and portfolio margin changes provide early warning of leverage clamps.
The practical point is that options are not needed to push up the spot market when basis, financing, borrowing and haircuts are reset together. The current standard is around 5-5.5% on notes, leaving the carry door open but more sensitive to changes in collateral demand and borrowing costs.
(Tag translation) Bitcoin
