A new report from 10x Research reveals that only 44% of Bitcoin ETF investments in the U.S. are for long-term holding, with the majority being arbitrage-driven trades.
According to Markus Thielen, head of research at 10x Research, hedge funds and trading firms are exploiting market inefficiencies rather than betting on Bitcoin’s long-term value. With market conditions shifting, Bitcoin ETFs are seeing reduced inflows as arbitrage profits decline.
Bitcoin ETF Inflows: Mostly Arbitrage, Not Institutional Adoption
Since their launch in January 2024, U.S. spot Bitcoin ETFs have seen $39 billion in net inflows. However, only $17.5 billion represents true long-only investments, while the remaining 56% is likely tied to arbitrage strategies, according to Thielen.
Hedge funds and trading firms are the largest holders of BlackRock’s IBIT ETF, focusing on short-term profit-making.
The “carry trade” strategy—buying spot Bitcoin via ETFs while shorting Bitcoin futures—is the primary driver of inflows.
This contradicts media narratives, which often suggest broad-based institutional adoption.
Why Hedge Funds Are Unwinding Their Bitcoin ETF Positions
With funding rates and basis spreads collapsing, arbitrage opportunities have become less profitable, leading to a slowdown in Bitcoin ETF inflows.
Hedge funds are actively unwinding ETF positions, selling ETFs while buying Bitcoin futures—a market-neutral move that does not directly impact BTC’s price.
Media often portrays ETF outflows as bearish, but in reality, this is a normal unwinding of arbitrage positions.
Shift in Bitcoin Buying Trends Post-Election
Thielen notes that after the U.S. presidential election, genuine long-term Bitcoin buying has picked up, but retail trading volumes remain low.
- Retail interest is crucial to sustain ETF demand.
- Institutional long-term adoption is still lagging despite the initial ETF excitement.
Final Thoughts: What’s Next for Bitcoin ETFs?
As arbitrage profits decline, Bitcoin ETFs may experience further outflows, but this doesn’t necessarily signal bearish sentiment. Instead, it highlights how market structure influences ETF demand, separating real adoption from short-term trading strategies.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency investments are highly volatile—conduct thorough research before making financial decisions.
