About 55% of US Bitcoin ETF Investments Are Short-Term: 10x Research

Highlights:

• 10x Research reported that most Bitcoin ETF investors use arbitrage strategies, while 44% invest long-term. 
• Bitcoin ETFs saw large outflows recently, reflecting weak long-term demand from investors. 
• Bitcoin price dropped in February, but there is still hope for a recovery.

Markus Thielen, head of research at 10x Research, reported on February 24 that around 56% of Spot Bitcoin (BTC) exchange-traded fund (ETF) investors use the funds for arbitrage strategies. In this approach, traders buy spot Bitcoin through ETFs while shorting Bitcoin futures. This strategy, known as the “carry trade,” allows them to profit from the price difference between the spot and futures markets. Meanwhile, only 44% of the inflows are linked to long-term investments.

#Bitcoin & @MicroStrategy: The New Favorite Assets for Hedge Funds@BlackRock IBIT, MicroStrategy – what we know …

👇1-21) Although Bitcoin ETFs have attracted $38.6 billion in net inflows since their January 2024 launch, our analysis suggests that only $17.5 billion (44%)… pic.twitter.com/7Bf95P9NpX

— 10x Research (@10x_Research) February 23, 2025

Since launching in January last year, Spot Bitcoin ETFs in the United States have seen approximately $39 billion in net inflows. However, Markus Thielen highlighted that less than half, about $17.5 billion, comes from true long-term investments. 

He explained that most Bitcoin ETF activity is driven by short-term opportunities rather than long-term institutional adoption. Hedge funds and trading firms are the main investors in these ETFs. They focus on profiting from market inefficiencies and yield spreads instead of taking long-term risks. However, low funding rates and basis spreads have made arbitrage less profitable. As a result, many trading firms have stopped adding funds to Bitcoin ETFs.

Thielen noted:

“Hedge funds and trading firms have stopped adding inflows to Bitcoin ETFs and are actively unwinding existing positions that no longer offer the profitable arbitrage opportunities seen a few months ago.”

Bitcoin ETFs Face Record Outflows as Long-Term Demand Weakens

U.S. spot Bitcoin ETFs saw cumulative net outflows of over $1.14 billion in the two weeks before February 21, according to Sosovalue data. This marked the largest two-week withdrawal period since trading began on January 11 last year. It surpassed the previous high of $1.12 billion in outflows recorded before June 21, when Bitcoin traded near $64,000.

Thielen said the outflows hurt market sentiment since media reports often view them as bearish signals. However, he explained that the process is market-neutral. Selling ETFs is balanced by buying Bitcoin futures, which cancels out any major price impact. “This indicates that the actual demand for Bitcoin as a long-term asset in multi-asset portfolios is significantly smaller than media reports suggest,” Thielen explained.

He also noticed a change in buying trends. Long-only Bitcoin purchases increased after the U.S. presidential election. “While genuine long-term buying has picked up, the decline in retail trading volumes has led to collapsing funding rates,” he said.

Bitcoin Struggles in February Despite Historical Gains

Weak demand for Bitcoin ETFs pressures the broader market. February usually brings gains for Bitcoin, with most years showing bullish trends except 2014 and 2020. However, this February is different as the BTC price has dropped by 7%. Analyst CryptosRus believes the month could still turn positive if Bitcoin closes above $102,500. 

❇️ February is typically a green month for Bitcoin – However, to avoid becoming the third red February in history, $BTC needs to close the month higher than 🎯$102,500 pic.twitter.com/yv1DjfWUNn

— CryptosRus (@CryptosR_Us) February 23, 2025

Bitcoin is currently priced at $95,640, down 0.54% in the past 24 hours and 0.44% over the week. Meanwhile, Ethereum is trading at $2,683, falling 4.30% daily and 2.35% over seven days. Over the past month, Bitcoin and Ethereum have dropped 8.49% and 18.16%, respectively.