Why did the astonishing inflow of US spot ETFs fail to drive a sharp rise in BTC?
Despite significant inflows into U.S. spot ETFs, their price performance has been stuck in a consolidation phase. To provide an in-depth analysis of the ETFâs demand side, we compared its BTC balance (862k BTC) to those of other major entities in the industry.
Below is a comparison of BTC holdings by major entities:
- US spot ETFs: 862k BTC
- Mt. Gox Trustee: 141k BTC
- US Government: 207k BTC
- Total across all exchanges: 2.3 million BTC
- Miners (excluding Patoshi): 706k BTC
The total holdings of all the above entities are estimated to be 4.23 million BTC, which accounts for 27% of the overall adjusted circulating supply (that is, the supply after deducting tokens that have been idle for more than seven years).
As a comprehensive entity, Coinbaseâs custody service holds a large number of BTC balances from exchanges and US spot ETFs. Specifically, Coinbase Exchange and Coinbase Custody Service currently hold approximately 270,000 and 569,000 BTC respectively.
Given that Coinbase serves both ETF customers and traditional on-chain asset holders, its role in the market pricing process has become increasingly prominent. By monitoring large transactions (whale trades) being deposited into Coinbase exchange wallets, we found a significant increase in deposit volume after the ETF was launched.
However, it is worth noting that a significant portion of deposits are associated with outflows from the GBTC address cluster, which constitutes a long-term supply pressure throughout the year.
In addition to the selling pressure generated by GBTC as the market rebounded to new highs, there is another factor that has weighed on demand for U.S. spot ETFs recently.
Looking at the CME Group futures market, open interest has stabilized above $8 billion, having previously hit an all-time high of $11.5 billion in March 2024. This could indicate that more traditional market traders are adopting spot arbitrage strategies.
This arbitrage strategy involves a market neutral position by purchasing a long spot position combined with a short position (going short) in a futures contract that trades at a premium for the same underlying asset.
Notably, entities classified as hedge funds are building increasingly larger net short positions in Bitcoin. This suggests that spot arbitrage trade structures may be an important source of inflow demand for ETFs, which serve as vehicles for obtaining long spot exposure. CME Groupâs open interest and overall market dominance have grown significantly since 2023, indicating that it has become the preferred venue for hedge funds to short futures through CME.
Currently, hedge funds have a net short position of $6.33 billion and $97 million in the CME Bitcoin and Micro CME Bitcoin markets, respectively.
The emergence and size of spot arbitrage trading between long US cash ETF products and short futures through CME Group has largely suppressed buy-side inflows into ETFs. This has had a relatively neutral impact on market prices, indicating that organic buyers driven by non-arbitrage demand are needed to further drive prices higher.
