Billions of bucks have been flowing into the U.S.-listed spot bitcoin exchange-traded funds (ETFs) recently, as the cryptocurrency made a sharp recovery rally from $75,000 to $100,000. The 11 spot ETFs have attracted over $5.61 billion since early April, according to SoSoValue. Most of the investment seems to be driven by bold, strategic bullish directional bets rather than market-neutral arbitrage plays, data analysis suggests. In April alone, the 11 spot ETFs drew in $2.97 billion in investor money, with an additional $2.64 billion flowing in so far this month. This surge in investment has boosted the net inflow since inception in January 2024 to over $41 billion.
Institutions have historically utilized these ETFs to set up non-directional arbitrage plays to profit from price discrepancies between futures and spot bitcoin markets. The so-called cash and carry arbitrage involves buying ETFs while simultaneously selling the CME futures to pocket the futures premium while bypassing price direction risks. However, the inflows since early April indicate a shift towards bullish directional bets rather than arbitrage plays. The Commitment of Traders (COT) report published by the Commodities Futures Trading Commission (CFTC) every week shows that leveraged funds have trimmed their net shorts, indicating a more bullish outlook on bitcoin’s future direction. Bitcoin was last trading at $102,700 at press time, according to CoinDesk data.
Large players are increasingly using the ETFs to express a clear market outlook on bitcoin’s future direction, as indicated by the shift in the nature of inflows in the ETFs. The data from the CFTC shows that leveraged funds didn’t significantly increase short positions, suggesting that most flows were directional bets rather than arbitrage. Imran Lakha, founder of Options Insight, noted in a blog post that the CFTC data reflects this trend, highlighting the changing dynamics in the ETF market. The rise in bullish directional bets signals a growing confidence in bitcoin’s price trajectory among institutional investors, further fueling the influx of capital into the spot ETFs. Overall, the surge in investment in U.S.-listed spot bitcoin ETFs underscores the growing interest and confidence in the cryptocurrency market as it continues to attract institutional capital.
