Research Reveals that Only 44% of Bitcoin ETF Purchases in the US are for Long-Term Holding

Spot Bitcoin exchange-traded fund (ETF) investors have mainly been using the vehicle for arbitrage strategies, with only 44% of inflows tied to long-term investments, as reported by crypto research firm 10x Research. Since their launch in January 2024, Spot Bitcoin ETFs in the United States have attracted approximately $39 billion in net inflows. However, only $17.5 billion, which is less than half, represents genuine long-only buying, according to Markus Thielen, head of research at 10x Research. The majority, around 56%, is likely tied to arbitrage strategies, where short Bitcoin futures positions offset the inflows. This is known as the “carry trade,” where traders buy spot Bitcoin through ETFs while simultaneously shorting Bitcoin futures and profiting from the price difference between spot and futures. Thielen stated that this means the actual demand for Bitcoin as a long-term asset in multi-asset portfolios is much smaller than what the media portrays. He also added that buying and selling of Bitcoin ETFs is primarily driven by funding rates and basis rate opportunities, with many investors focusing on short-term arbitrage rather than long-term capital appreciation. The largest holders of BlackRock’s IBIT ETF are hedge funds and trading firms that specialize in exploiting market inefficiencies and capturing yield spreads, rather than taking outright directional risk. Currently, funding rates and basis spreads are too low to justify new arbitrage positions, causing hedge funds and trading firms to stop adding inflows to Bitcoin ETFs and actively unwind existing positions that no longer offer profitable arbitrage opportunities. Last week, there were four consecutive trading days of outflows, with $552 billion leaving the products, according to Farside Investors. However, spot Bitcoin remained range-bound for the week. Thielen stated that this hurts market sentiment, as media reports often frame these outflows as bearish signals. He also mentioned that the unwinding process is actually market-neutral since it involves selling ETFs while simultaneously buying Bitcoin futures, effectively offsetting any directional market impact. Real Vision CEO Raoul Pal made a similar claim in mid-2024, stating that around two-thirds of the net inflows into spot Bitcoin ETFs may be coming from arbitrage trading. However, Thielen mentioned that real buying flows have picked up since the US presidential election, but funding rates have collapsed as retail trading volumes have declined. Therefore, when funding rates fall, the strategy becomes less attractive, causing trading firms to unwind their positions, which has been observed in the past week.