Since July 5, the Bitcoin ETF has seen net inflows worth $1.91 billion in the US market. However, its price is still having difficulty staying above $65,000.

Meanwhile, the S&P 500 index hit an all-time high on July 16, and gold, considered the world's largest reserve asset, traded at a historic high on July 17. This suggests that the factors hindering Bitcoin's performance are unrelated to traditional financial markets. So what is causing this inefficiency?

Not all Bitcoin ETF buyers are betting on BTC price increases

First, buyers of ETFs may have moved away from spot positions, perhaps for tax reasons or to use those stocks as collateral for traditional financial transactions. Additionally, the major holdings of these ETFs include hedge funds known for arbitrage trades, which aim to profit from market deviations without betting on price movements. For example, cash and spot trading involves selling a Bitcoin futures contract while simultaneously buying an equivalent spot ETF position.

Largest holders of IBIT and FBTC according to SEC filings. Source: Fintel

Hedge funds known for arbitrage trades include Millennium Management, Schonfeld Strategic Advisors, Jane Street, HBK Investments, Susquehanna International and Bracebridge Capital. It is unlikely that these institutional investors are engaging in simple transactions, such as fully hedged cash and spot positions. The important point is that these funds are not typical long-term holders, nor are they strong believers in the value of Bitcoin.

Total Bitcoin futures on the Chicago Mercantile Exchange (CME), which measures the total number of active contracts, currently stands at $10.2 billion, up 23% from last week, according to data from the Coinglass. For every futures buyer, there is an equivalent short seller, suggesting that many hedge funds are looking to profit from the BTC futures spread, which is currently running at an annual rate of 11%.

Funds that engage in arbitrage trades will eventually have to cover their short futures market positions, but the market impact is neutralized by the sale of the spot BTC position. However, this does not rule out the possibility that other sophisticated institutional investors are betting on a falling Bitcoin price. The surge in BTC futures on CME partly explains the limited impact of net inflows from spot ETFs.

Inflation falls in the US, but may not help Bitcoin price

From a broader perspective, Bitcoin's main appeal lies in its sovereignty and predictability, thanks to its hard currency policy and independent network of nodes verifying the shared ledger. This story becomes more convincing when central banks fail, either because the purchasing power of their fiat currencies collapses or because of a lack of faith in the government's ability to repay its debt. However, inflation in the US is falling and US Treasuries are strengthening, showing that investors have confidence in the US Federal Reserve's strategy.

US 5-year government bond yield | Source: TradingView

The yield on the five-year U.S. Treasury note fell to 4.07% on July 17 from 4.43% on July 1, indicating higher demand from buyers. Investors are accepting lower yields for these fixed income assets because they are considered extremely safe or in anticipation of lower future inflation. This trend is unfavorable to alternative stores of value like Bitcoin while promoting lower interest rates, which stimulate the economy and could boost the stock market.

As market confidence in the US economy increases, the narrative supporting Bitcoin as an independent medium of exchange with a mathematically determined supply weakens. In the short term, positive macroeconomic data shows no signs of stress negatively affecting Bitcoin price. This offsets bullish sentiment from spot ETF inflows.

Source: https://tapchibitcoin.io/dong-von-vao-bitcoin-etf-Giao-ngay-tang-manh-nhung-btc-van-gap-kho-khan.html