Bitcoin ETFs Hold 869,000 BTC: Impact on Market Dynamics
Bitcoin ETFs – Bitcoin exchange-traded funds (ETFs) have captured significant media attention in 2024, marking a historic milestone as the most successful ETF launch of all time. Since their introduction on January 11, these ETFs have attracted a staggering $18.9 billion in net inflows, according to data from Farside. Currently, Bitcoin ETFs hold approximately 869,000 BTC, representing about 4% of the circulating Bitcoin supply.
Breakdown of Holdings and Performance
The nine newly launched ETFs, excluding Grayscale Bitcoin Trust (GBTC), hold around 646,000 BTC. GBTC itself accounts for an additional 223,000 BTC, as reported by heyapollo data. Notably, this year has witnessed the launch of 2,000 ETFs, with iShares Bitcoin Trust (IBIT) and Fidelity Wise Origin Bitcoin Fund (FBTC) ranking among the top 10 in terms of assets.
ETF Trading Volume: A Small Fraction of the Market
Despite the impressive inflows, the ETF market still constitutes a small fraction of the overall Bitcoin trading volume. On October 11, the last full trading day, the Bitcoin futures market recorded a trading volume of $53.4 billion, while the spot market traded $4.5 billion. In comparison, Bitcoin ETFs managed to trade only $2 billion, accounting for roughly 3% of the total Bitcoin market volume that day.
The Basis Trade and Its Influence
A portion of the inflows into Bitcoin ETFs can be attributed to the “basis trade,” a strategy where investors seek to profit from the price differences between spot and futures prices. This involves going long on the underlying asset while shorting the futures contract, which often trades at a premium. As the futures contract approaches expiration, its price converges with the spot price, closing the arbitrage opportunity and allowing the investor to capture the spread.
This strategy is considered market-neutral since the investor holds both long and short positions in the same asset, effectively locking in the arbitrage premium without exposing themselves to directional market risks.
Notable Holders of IBIT
According to Fintel data, major institutional holders of IBIT have been disclosed in the 13-F filings, which require institutions managing over $100 million in assets to report ETF purchases. Key holders include Goldman Sachs and Jane Street Capital, both of which are authorized participants (APs) involved in the creation and redemption of ETF shares. Additionally, hedge funds like Millennium Management and Capula Management appear to utilize the ETF for basis trading, while the State of Wisconsin Investment Board stands out as a significant holding that doesn’t seem to fit this strategy.
Future Expectations for Bitcoin ETFs
Looking ahead, private wealth management firm Bernstein has referred to the institutional basis trade as a “Trojan horse for adoption.” Bernstein suggests that as liquidity in the ETF market increases, these trades could lead to net long positions, further enhancing liquidity and investor participation.
Another potential catalyst for Bitcoin ETFs is the approval of physically settled options tied to IBIT. These options are favored by more sophisticated investors, providing opportunities for passive yield through strategies such as covered calls or enabling miners to hedge their positions. As ETF adoption continues to rise, these factors are expected to play a significant role in shaping the market landscape.
In conclusion, the surge in Bitcoin ETFs and their associated inflows underscores a shifting dynamic in the cryptocurrency market, setting the stage for increased adoption and participation from institutional investors.
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