Bitcoin ETFs see $39 billion inflows

According to 10x Research, U.S. spot Bitcoin (CRYPTO:BTC) ETFs have drawn approximately $39 billion in net inflows since their launch in January 2024.

However, Markus Thielen, head of research at 10x Research, suggests that only $17.5 billion represents genuine long-term investment, indicating that a significant portion, about 56%, is linked to arbitrage strategies.

Thielen refers to the "carry trade," where traders buy spot Bitcoin through ETFs while simultaneously shorting Bitcoin futures, capitalising on the price difference.

This strategy implies that the actual demand for Bitcoin as a long-term asset in multi-asset portfolios "is significantly smaller than the media portrays."

He added that hedge funds and trading firms, specialising in exploiting market inefficiencies, primarily drive the buying and selling of Bitcoin ETFs, focusing on short-term arbitrage rather than long-term capital appreciation.

Thielen noted that reduced funding rates and basis spreads have led hedge funds and trading firms to halt new inflows into Bitcoin ETFs and unwind existing positions.

Last week, the products experienced four consecutive trading days of outflows, with $552 billion exiting, according to Farside Investors.

Thielen clarified that this unwinding is "actually market-neutral since it involves selling ETFs while simultaneously buying Bitcoin futures, effectively offsetting any directional market impact."

Real Vision CEO Raoul Pal made similar observations in mid-2024, suggesting that around two-thirds of the net inflows into spot Bitcoin ETFs may originate from arbitrage trading.

Since the US presidential election, Thielen said that real buying flows "have certainly picked up."

At the time of reporting, the Bitcoin (BTC) price was $95,817.39.