ETFs
Bitcoin ETFs are breaking records. Here’s why the price won’t move – DL News
- Bitcoin ETFs experienced a record 20-day inflow streak.
- But the price of Bitcoin remained stuck.
- Indeed, hedge funds could counterbalance their ETF purchases with short positions.
Spot Bitcoin exchange traded funds suck up funds like there is no tomorrow.
However, the price of Bitcoin does not explode. For almost a month now, the leading cryptocurrency has been trading in a tight range between $67,000 and $72,000.
Crypto Market Maker Wintermute Free an explanation in its latest report. The problem, the company says, is that hedge funds that buy ETF shares could well sell the asset elsewhere.
$100 billion in assets
Bitcoin ETFs saw inflows for 19 consecutive days yesterday – a new record.
And just last week, Bitcoin investment vehicles amassed nearly $2 billion worldwide, bringing crypto assets under management to $100 billion for the first time since March.
But even then, Bitcoin is still trading at $69,000, the same price as it was in mid-May.
CME, the largest platform by Bitcoin derivatives volume, offers an idea of why: Hedge funds took an unprecedented $7.5 billion in short positions, according to Wintermute.
Not necessarily bearish
It’s not necessarily because they are bearish on Bitcoin.
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By combining short positions with potential exposure to Bitcoin ETFs, hedge funds can take advantage of inefficiencies in the crypto market, Wintermute said.
These funds likely target gaps between the spot price of Bitcoin in ETFs and its futures contracts on the CME exchange.
This strategy is considered market neutral, meaning firms are not making directional bets on the price of Bitcoin – they are simply arbitrageuring the asset across different venues.
Hedge fund strategies
The hedge fund Millennium Management, which manages some $60 billion, had probably deployed such a strategy with other peers when it purchased more than $2 billion worth of Bitcoin ETFs in May.
In other words, these flows are deliberately countered on other sites by the same institutions that acquired the shares.
“The impact of recent changes in market structure is becoming evident, particularly with moderate price action despite significant ETF inflows,” Wintermute said. “Markets remain limited. »
Crypto market players
- Bitcoin is down 3.2% over the past 24 hours to around $67,145.
- Ethereum is down 3.7% over the same period at $3,537.
What we read
Tom Carreras is a markets correspondent for DL News. Do you have a tip on Bitcoin ETFs? Contact us at tcarreras@dlnews.com