⭐️ Spot Bitcoin #ETF inflows surge, but #BTC struggles to rally above $65K

Arbitrage trading of the spot BTC ETFs and a drop in demand for inflation hedges could be limiting Bitcoin’s price upside.

Since July 5, Bitcoin has seen net inflows of $1.91 billion in its US spot exchange-traded funds (ETFs). Despite this, its price has struggled to stay above $65,000. 

Meanwhile, the S&P 500 index reached an all-time high on July 16, and gold, considered the world's largest reserve asset, traded at a historical high on July 17. This indicates that the factors hindering Bitcoin's performance are not tied to the traditional finance markets. But what exactly is causing this underperformance?

🔸 Not every spot Bitcoin ETF buyer is betting on BTC price upside

To begin with, buyers of spot ETFs might have shifted away from spot positions, possibly for tax reasons or to use those shares as collateral for traditional finance trades. Additionally, major holders of these ETFs include hedge funds known for arbitrage trades, which aim to profit from market inefficiencies without betting on price movements. For example, the cash and carry trade involves selling Bitcoin futures while simultaneously buying the equivalent spot ETF position.

Hedge funds known for arbitrage trades include Millennium Management, Schonfeld Strategic Advisors, Jane Street, HBK Investments, Susquehanna International, and Bracebridge Capital. It's not certain that these institutional investors are engaging in straightforward trades, such as fully hedged cash and carry positions. The key point is that these funds are not typical long-term holders, nor are they strong believers in Bitcoin's value proposition.

The Chicago Mercantile Exchange (CME) Bitcoin futures open interest, which measures the total active contracts, currently stands at $10.2 billion, up 23% from the previous week, according to Coinglass data. For every buyer of a futures contract, there is an equivalent short seller, suggesting that many hedge funds are seeking gains from the BTC futures contracts premium.