Research has found that a significant portion of Bitcoin ETF inflows are directed at arbitrage strategies, highlighting limited impact on long-term investments.
Spot Bitcoin ETF Market: Key Insights
Since their launch in January 2024, Bitcoin ETFs in the USA have attracted approximately $39 billion. However, only $17.5 billion of this represents genuine long-only investment, according to 10x Research. The majority of inflows are linked to arbitrage strategies where investors simultaneously buy spot Bitcoin and take short positions on futures.
Volume and Dynamics of Bitcoin ETF Flows
In recent weeks, there has been a trend of outflows from Bitcoin ETFs, with $552 billion leaving over four consecutive trading days, according to Farside Investors. This trend is market-neutral as arbitrage strategies involve simultaneous buying and selling of assets, smoothing market fluctuations.
Outlook and Changes on the Horizon
With the upcoming US elections, long-only Bitcoin investments are becoming more active. However, the drop in funding rates has made arbitrage strategies less appealing, leading to a shift in trading firms' positions. The decline in retail trading volumes also affects market dynamics.
The study emphasizes that current activities in the Bitcoin ETF market are largely driven by short-term strategies like arbitrage rather than long-term investments. This may change with further market development and increased interest in digital assets in diverse investment portfolios.
