A report by 10x Research suggests that a significant portion of inflows into U.S. spot Bitcoin exchange-traded funds (ETFs) is driven by short-term trading rather than long-term investment strategies.
Since their launch in January 2024, these ETFs have attracted approximately $39 billion in net inflows. However, Markus Thielen, head of Research at 10x Research, estimates that only $17.5 billion—around 44%—represents genuine long-term holdings.
He noted that the remaining 56% of inflows are primarily linked to arbitrage strategies, particularly the “carry trade.” This strategy involves investors purchasing spot Bitcoin through ETFs while shorting Bitcoin futures to profit from price discrepancies between the two markets. As a result, Thielen argues that the true demand for Bitcoin as a long-term asset in multi-asset portfolios is far lower than media reports suggest.
Rather than signaling widespread institutional adoption, much of the activity in Bitcoin ETFs is driven by funding rates and short-term trading opportunities. Highlighting this trend, Thielen pointed out that hedge funds and trading firms are the largest holders of BlackRock’s IBIT ETF. Instead of making directional bets on Bitcoin’s price movement, these firms focus on capturing market inefficiencies to generate profits.
However, recent buying behaviour has shown signs of change; Thielen observed an increase in long-only Bitcoin purchases following the U.S. presidential election, suggesting a rise in genuine long-term demand. Despite this, he emphasized that declining retail trading volumes have led to collapsing funding rates, further reshaping the ETF market landscape.
The cryptocurrency market, including Bitcoin, has been influenced by broader market conditions, particularly the Federal Reserve’s hawkish stance in mid-December, which dampened investor sentiment. Analyst Thielen anticipates continued consolidation in Bitcoin and other cryptocurrencies due to low fiat-to-stablecoin conversions despite the end of the holiday season and stablecoin inflows not showing significant recovery. While increased minting indicates some demand, Thielen remains cautious, noting that a clear market direction requires a more substantial increase in stablecoin inflows.
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