Majority of Bitcoin ETF Inflows Linked to Arbitrage, Not Long-Term Investment – 10x Research
According to 10x Research, approximately 56% of Bitcoin ETF inflows are tied to arbitrage strategies, rather than long-term holdings. This suggests that Bitcoin’s role in multi-asset portfolios may be less significant than widely perceived.
Arbitrage Dominates Bitcoin ETF Activity
Since their launch in January 2024, spot Bitcoin ETFs in the U.S. have attracted $39 billion in net inflows. However, Markus Thielen, head of research at 10x Research, estimates that only $17.5 billion—less than half—represents genuine long-term investments.
The remaining 56% is largely attributed to arbitrage strategies, particularly the carry trade. In this approach, traders buy spot Bitcoin ETFs while simultaneously shorting Bitcoin futures, profiting from the price differences between the two.
Reduced Bitcoin Demand in Multi-Asset Portfolios
Thielen suggests that Bitcoin’s necessity in diversified portfolios may be overstated by media narratives. Instead, hedge funds and trading firms specializing in arbitrage—rather than investors betting on Bitcoin’s long-term growth—are the primary participants in funds like BlackRock’s IBIT ETF.
Declining Arbitrage Opportunities Impact ETF Holdings
With arbitrage spreads narrowing, hedge funds and trading firms have begun exiting their Bitcoin ETF positions. As a result, funding rates and basis spreads have dropped, making new trades less attractive.
According to Farside Investors, around $552 million exited Bitcoin ETFs over four trading days last week. Meanwhile, Bitcoin’s price remained range-bound, showing minimal volatility.
Despite negative media coverage, Thielen argues that these withdrawals are market-neutral. Selling Bitcoin ETFs while buying Bitcoin futures offsets directional price movement, meaning these liquidations do not necessarily signal bearish sentiment.
