Only 44% of US Bitcoin ETF buying has been for hodling — 10x Research
10x Research’s Markus Thielen says the demand for Bitcoin as a long-term asset could be “significantly smaller than the media portrays.”
Spot Bitcoin exchange-traded fund investors have primarily been using the vehicle for arbitrage strategies, with just 44% of inflows tied to long-term investments, according to a crypto research firm.
Spot Bitcoin ETFs in the United States have attracted around $39 billion in net inflows since their January 2024 launch. However, only $17.5 billion, less than half, represents genuine long-only buying, reported 10x Research head of research Markus Thielen.
The majority, or around 56%, “is likely tied to arbitrage strategies, where short Bitcoin futures positions offset inflows,” he added, referring to the “carry trade” — where traders buy spot Bitcoin through ETFs while simultaneously shorting Bitcoin futures and profiting from the difference between spot and futures prices.
Thielen said that it means that the actual demand for Bitcoin as a long-term asset in multi-asset portfolios “is significantly smaller than the media portrays.”
“Rather than reflecting broad-based institutional adoption, the buying and selling of Bitcoin ETFs is primarily driven by funding rates (basis rate opportunities), with many investors focusing on short-term arbitrage rather than long-term capital appreciation.”
Thielen added that the largest holders of BlackRock’s IBIT ETF are hedge funds and trading firms that “specialize in exploiting market inefficiencies and capturing yield spreads” rather than taking outright directional risk.
With funding rates and basis spreads currently too low to justify new arbitrage positions, “hedge funds and trading firms have stopped adding inflows to Bitcoin ETFs and are actively unwinding existing positions that no longer offer the profitable arbitrage opportunities seen a few months ago,” he said.
Last week saw four consecutive trading days of outflows, with $552 billion leaving the products, according to Farside Investors. Meanwhile, spot Bitcoin remained range-bound for the week.
“This hurts market sentiment, as media reports often frame these outflows as bearish signals,” said Thielen, who added that the unwinding process is “actually market-neutral since it involves selling ETFs while simultaneously buying Bitcoin futures, effectively offsetting any directional market impact.”
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Real Vision CEO Raoul Pal said something similar in mid-2024 when he claimed around two-thirds of the net inflows into spot Bitcoin ETFs may be coming from arbitrage trading.
Tides may be shifting, however. Thielen said that real buying flows “have certainly picked up” since the US presidential election.
“While genuine long-only Bitcoin buying has increased since Trump’s election, funding rates have collapsed as retail trading volumes have declined.”
So when funding rates fall, the strategy becomes less attractive, causing trading firms to unwind their positions, which is what has been seen for the past week.
