Reality Check: Institutional Demand for Bitcoin Overstated

Since their launch, spot Bitcoin ETFs in the United States have attracted net inflows of $38.6 billion, as reported by 10x Research. However, only $17.5 billion, or 44%, represents actual long positions.

The report states, «The majority – 56% – is likely tied to arbitrage strategies where short futures positions offset the influx of capital.»

Traders are capitalizing on the price discrepancies between spot and futures markets by purchasing the ETFs while shorting derivatives, explained Marcus Thielen, founder of 10x Research.

He believes these figures indicate that the real demand for Bitcoin as a long-term portfolio asset is «significantly lower than portrayed in the media.»

“Rather than reflecting broad institutional adoption, the buying and selling of BTC-ETFs are primarily driven by funding rates. Many investors are focused on short-term arbitrage rather than long-term capital appreciation,” Thielen stated.

The largest holders of positions in BlackRock’s IBIT are hedge funds and trading firms. These players «specialize in exploiting market inefficiencies and capturing yield spreads,» rather than long-term investment, the expert added.

In the current market environment, he noted, funding rates and underlying spreads are too low to justify holding positions or opening new ones.

According to SoSoValue, in the last four trading days, investors withdrew $559.4 million from Bitcoin ETFs.

Thielen pointed out that the media often presents such outflows as bearish signals, which can negatively affect market sentiment, although the process is “actually neutral.” It involves simultaneously selling ETF shares and buying futures, effectively offsetting any directional impact on the market, he emphasized.

It’s worth mentioning that in the year following their launch, the total trading volume for spot Bitcoin ETFs exceeded $750 billion.