10x Research: Only 44% of Capital Inflow into Bitcoin Spot ETFs is Attributed to Long-Term Buyers

10x Research: Only 44% of Capital Inflow into Bitcoin Spot ETFs is Attributed to Long-Term Buyers

10x Research: Only 44% of Capital Inflow into Bitcoin Spot ETFs is Attributed to Long-Term Buyers

Since the launch of the Bitcoin spot Exchange-Traded Fund (ETF) in the United States in January 2024, it has attracted approximately $39 billion in net inflows. However, according to digital asset research firm 10x Research, only $17.5 billion (44%) of this amount represents genuine long-term buying interest.

Markus Thielen, founder and head of research at 10x Research, noted in a report released last Sunday that the majority of funds flowing into Bitcoin ETFs (around 56%) “are likely related to arbitrage strategies.” He referred to the carry trade, where traders buy Bitcoin spot through these ETFs while simultaneously shorting Bitcoin futures, profiting from the price differential between the spot and futures markets.

Thielen indicated that this implies that the actual demand for Bitcoin as a long-term asset in a multi-asset portfolio “is far lower than what the media portrays.” He wrote:

Thielen added that the largest holders of the IBIT fund (the Bitcoin spot ETF issued by BlackRock) are hedge funds and trading firms, which “focus on exploiting market inefficiencies and capturing yield spreads,” rather than directly taking directional risk.

Institutional Liquidation
Thielen stated that due to the currently low funding rates and basis trading returns, which cannot support new arbitrage positions, “hedge funds and trading firms have stopped increasing inflows into Bitcoin ETFs and are actively liquidating existing positions.” These positions no longer provide the profitable arbitrage opportunities that existed a few months ago.

According to data from Farside Investors, U.S. Bitcoin spot ETFs experienced net outflows for four consecutive trading days last week, totaling $5.52 billion. Meanwhile, Bitcoin spot prices continued to consolidate within a range. Thielen remarked, “This will harm market sentiment, as media reports often interpret these outflows as bearish signals.”

He added that this liquidation process “is actually market neutral, as it involves selling the ETF while buying Bitcoin futures, effectively offsetting any directional market impact.”

However, market trends may be shifting. Thielen pointed out that since the U.S. presidential election, genuine buying interest “has indeed seen a resurgence.” He wrote:

Therefore, as funding rates decline, the attractiveness of arbitrage strategies diminishes, leading trading firms to begin liquidating positions, which is precisely what has been observed in the market over the past week.