Bitcoin Faces Volatility Until 'Organic Buyers' Enter the Market, Says VC Kyle Chasse

Bitcoin’s price continues to experience significant volatility, and according to Kyle Chasse, founder of Master Ventures, this trend is likely to persist until genuine, long-term buyers enter the market. Chasse argues that the current market dynamics are largely driven by hedge funds seeking short-term profits rather than true believers in Bitcoin’s value.

In a post on February 27, Chasse explained that the entry of exchange-traded funds (ETFs) into the Bitcoin market didn’t just attract long-term holders. Instead, it brought in hedge funds looking to profit from short-term arbitrage opportunities. This, Chasse says, has created a liquidity game that is keeping Bitcoin’s price fluctuating, with volatility expected to continue.

Hedge Funds and Low-Risk Yield Trades

Chasse pointed out that hedge funds have been exploiting a "low-risk yield" strategy using Bitcoin spot ETFs and CME futures. The strategy involves taking advantage of price differences between Bitcoin’s spot price and its futures price. The futures market typically trades at a higher price, allowing traders to profit from this difference—known as the cash-and-carry trade.

However, as Bitcoin’s market price has fallen, this trade has become unprofitable. According to Chasse, the collapse of the price difference between Bitcoin futures and spot prices is unwinding these trades, contributing to the current market downturn.

“Hedge funds don’t care about Bitcoin,” Chasse emphasized, explaining that these institutional players weren’t betting on Bitcoin’s long-term price appreciation. Instead, they were focused on generating yields through short-term arbitrage, which has now lost its profitability as the market has corrected.

Volatility and the Need for Organic Buyers

Chasse's statement underscores the importance of attracting "real organic buyers"—investors who are genuinely interested in Bitcoin for its long-term value, rather than hedge funds looking to extract quick profits. Until such buyers step in, he believes Bitcoin will remain in a state of volatility.

He explained that Bitcoin’s price movements are largely driven by leveraged positions getting liquidated and the unwinding of the cash-and-carry trade. The continued presence of these short-term trading strategies is likely to keep the market in a state of flux until new, genuine interest in Bitcoin emerges.

Market Conditions and the Potential for a Bottom

Bitcoin’s price has recently dropped below $80,000 for the first time since November, a key psychological level for traders. As of the latest data, Bitcoin was trading at approximately $79,532, according to TradingView.

Swyftx lead analyst Pav Hundal commented that while Bitcoin could face more downside in the short term, much of the market shakeout may have already occurred. He noted that the potential release of U.S. inflation data on February 28 could provide a boost if the numbers come in lower than expected.

Macroeconomic Factors and Broader Crypto Market Impact

The drop below $80,000 comes amid rising macroeconomic concerns, particularly related to U.S. President Donald Trump’s proposed tariffs. Bitcoin’s recent struggles mirror broader uncertainty in the global economy, which has also affected other digital assets and the cryptocurrency market as a whole.

Chasse attributes much of the market turmoil to hedge funds pulling liquidity from the market as their low-risk yield strategies unwind. With these funds exiting, the market has experienced a sharp decline, leaving Bitcoin in a free-fall state.

Looking Ahead

For Bitcoin to resume its upward trend, many analysts, including Chasse, believe that it needs to attract true long-term investors who are committed to its potential as a store of value and a hedge against inflation. Until such buyers enter the market, Bitcoin will likely continue to be at the mercy of short-term traders and macroeconomic uncertainties.