Bitrabo Editorial
An analysis reveals that a significant portion of the capital entering Bitcoin exchange-traded funds (ETFs) stems from arbitrage strategies rather than direct retail investments.
Raoul Pal, CEO of Real Vision, has pointed out this trend, based on data related to ETF ownership and trading behaviors.
The Impact of Institutions on Market Dynamics
Raoul Pal highlights the prevalence of arbitrage activities in the current Bitcoin spot ETF landscape. Studies suggest that approximately two-thirds of net inflows come from arbitrage trading, especially among major institutional holders of these funds.
Examining the actions of the largest holders of Bitcoin spot ETFs in the U.S., it is evident that hedge funds and institutional investors wield substantial influence.
Data shared by Tom Dauvley indicates that the top 80 holders, mostly hedge funds, manage assets worth around $10.26 billion of the total $15.42 billion in net inflows, showcasing a significant market concentration.
Millennium Management emerges as the largest individual holder, with investments diversified across various ETF issuers like Bitwise, Grayscale, Fidelity, BlackRock, ARK, and 21Shares.
Pal notes that the flow of funds predominantly leans towards arbitrage, involving capitalizing on price differences between an ETF’s net asset value and the underlying Bitcoin price.
There is ongoing debate on the extent to which arbitrage impacts overall ETF flows. Some, like crypto trader Joseph B., suggest arbitrage may constitute less than 15% of total flows across U.S. Bitcoin ETFs, managing over $42 billion in assets.
Hmmmm don’t necessarily agree. Excl GBTC, there is 605,000 BTC ($42 Billion)in ETFs
Short interest on the CME (The only place institutions would be doing their basis trade?) has about 91,000 in BTC ($6 Billion) shorts.
The recent inflows could certainly be attributed to the…
— Joseph B (@Packin_Sats) June 11, 2024
Arbitrage’s Influence on the Bitcoin ETF Landscape
Currently priced at $69,523, BTC has risen by 3.5% in the past 24 hours following a recent CPI report signaling a slowdown in U.S. inflation. This marks a recovery from a week-long decline.
Prior to this shift, U.S. spot Bitcoin ETFs experienced substantial net outflows, with $200 million withdrawn on Tuesday, continuing a trend from earlier in the week that interrupted a run of net inflows.
Grayscale’s Bitcoin Trust (GBTC) saw the largest withdrawals, around $121 million, while Ark Invest’s ARKB reported $56 million in outflows.
Information from SoSoValue reveals Bitwise’s BTC ETF (BITB) witnessed a $12 million exit, with Fidelity and VanEck noting smaller outflows in single digits. BlackRock’s IBIT reported no net flows that day.
The continuous 19-day streak of net inflows into the 11 U.S. Bitcoin ETFs concluded with outflows nearing $65 million on Monday. Since their debut in January, these ETFs have collectively garnered net inflows totaling $15.42 billion.
Featured image created with DALL-E, Chart from TradingView