The current rise in the Bitcoin market is mainly driven by ETF expectations. During this round of rise, a total of about $15-18 billion entered the market.

The sources of ETF buying include $6-8 billion in arbitrage funds. Bitcoin holders with about $5 billion transferred Bitcoin to ETFs, and the long-term holdings were about $5-6 billion, and the remaining $3 billion was active buying.

ETFs are concentrated in Coinbase for special custody, which is equivalent to taking Bitcoin out of the circulation market, resulting in a reduction in supply. ETF arbitrage takes advantage of the price difference between Bitcoin and futures. When the futures price is higher than the spot price, investors can buy Bitcoin in the spot market and short it in the futures market to make a profit.

The trading data of CME and Binance show that CME has a high position, reflecting that a large number of positions are not traded on a daily basis, but are used for arbitrage. High premiums trigger more arbitrage behavior, and arbitrageurs lock in risk-free returns by buying ETFs and shorting futures at the same time.

Arbitrage behavior in the Bitcoin market drives prices up through the premiums of CEX and futures contracts. Arbitrageurs buy Bitcoin futures contracts, push up the futures premium, and then buy Bitcoin through arbitrage, forming a loop. However, these arbitrageurs make more profit when the Bitcoin price falls, because the futures price usually falls more than the spot price, and they can sell futures and spot at the same time to realize profits.

Currently, the premium of Bitcoin ETF is still around 10%, which attracts more arbitrage funds into the market and maintains the price of Bitcoin. However, this also brings risks. Once the premium disappears, arbitrageurs may quickly withdraw from the market and sell ETFs and futures, causing prices to plummet.