- The bulk, about 56%, is probably associated with arbitrage strategies as per 10x Research.
- This indicates that there is much less of a need for Bitcoin in multi-asset portfolios for the long run.
Among Bitcoin exchange-traded funds, arbitrage methods have been the norm, with just 44% of inflows being linked to long-term investments, according to a crypto research firm, 10x Research.
Since their introduction in January 2024, spot Bitcoin ETFs in the US have seen net inflows of around $39 billion. But according to 10x Research’s director of research Markus Thielen, only $17.5 billion—less than half—represents genuine long-only purchasing.
Arbitrage Opportunities
The bulk, about 56%, is probably associated with arbitrage strategies, he said. Further mentioning the “carry trade” in which traders purchase spot Bitcoin via ETFs. While simultaneously shorting Bitcoin futures in order to profit from the spread between the two prices.
According to Thielen, this indicates that there is much less of a need for Bitcoin in multi-asset portfolios for the long run than what the media would have you believe.
Thielen elaborated by saying that trading companies and hedge funds that focus on taking advantage of yield gaps and market inefficiencies. Rather than assuming direct direction risk are the biggest investors of BlackRock’s IBIT ETF.
The arbitrage opportunities that were available a few months ago are no longer available, and hedge funds and trading firms are actively selling out their Bitcoin ETF holdings because funding rates and basis spreads are too low to justify new positions.
According to Farside Investors, $552 billion left the products over the course of four trading days last week. At the same time, Bitcoin’s price remained range-bound throughout the week.
Media coverage of these withdrawals as negative signals is hurting market sentiment, according to Thielen. However, unwinding is essentially market-neutral since it entails selling exchange-traded funds (ETFs) while purchasing Bitcoin futures, which effectively offsets any directional market impact.
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