Approximately two-thirds of the total inflow into spot Bitcoin exchange-traded funds (ETFs) may be attributed to arbitrage trading, according to Real Vision CEO Raoul Pal. In a post on June 11, Pal referenced data provided by crypto analyst Tom Dunleavy, suggesting that the majority of ETF flow comes from arbitrageurs rather than retail investors.
The data revealed that the top 80 holders of United States-based spot Bitcoin (BTC) ETFs are hedge funds, with investments coming from a mix of institutional and individual investors. These 80 firms collectively own around $10.26 billion in spot Bitcoin ETF shares, which accounts for approximately two-thirds of the $15.42 billion in net inflows since the launch of spot Bitcoin ETFs on Jan. 11, as reported by Farside Investors.
Among these firms, international hedge fund Millennium Management holds the largest share of Bitcoin ETF shares, totaling $1.94 billion. On May 16, Millennium Management diversified its Bitcoin ETF holdings across various issuers, including Bitwise, Grayscale, Fidelity, BlackRock, and ARK, as well as 21Shares’ ETFs.
Despite Pal’s assertions, some have challenged his claims, noting that excluding the Grayscale Bitcoin Trust (GBTC), the 10 U.S. Bitcoin ETFs manage assets totaling $42 billion, along with short interest on the CME.
While arbitrage trading may play a role in recent inflows, it is estimated to make up less than 15% of overall ETF flows, according to crypto trader Joseph B. Pal believes that the flows from these firms primarily involve arbitrage, as they tend to focus on this type of trading rather than taking directional risks based on Bitcoin’s price movements.
Arbitrage trading involves identifying short-term opportunities by exploiting differences between the net asset value of the spot Bitcoin ETF and the price of Bitcoin itself. The majority of these top firms are not considered “Buy and Hold” investors, according to Deep Q Digital CEO Carlos Zendejas.
It is important to note that this article does not offer investment advice or recommendations. All investment decisions involve risk, and readers are encouraged to conduct their own research before making any investment choices.
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