‘Most’ ETF flows can be driven by arbitrage – Raul Pal
About two-thirds of the net worth of Bitcoin exchange-traded funds (ETFs) could come from arbitrage, according to Raul Pal, CEO of Real Vision.
“If this is correct, it shows that most ATF flows are arbitrageurs and retail is not yet a key driver,” Pal said in a June 11 X post, citing data provided by crypto analyst and MV Capital partner Tom Dunleavy. .
The data revealed that the “top 80 holders” of US-based spot Bitcoin (BTC) ETFs are hedge funds with capital raised from a variety of institutional and individual investors.
The 80 firms hold approximately $10.26 billion worth of position Bitcoin ETF shares, out of $15.42 billion in net income since the Bitcoin ETFs launched on January 11.
Global hedge fund Millennium Management holds $1.94 billion worth of Bitcoin ETF shares, the largest of any firm. On May 16, he spread his Bitcoin ETF holdings across multiple issuers, holding shares in Bitwise, Grayscale, Fidelity, BlackRock and ARK and 21Shares' ETFs.
However, countering Pal's other claims, the 10 US Bitcoin ETFs, excluding Greyscale Bitcoin Trust (GBTC), have $42 billion in assets under management and short interest on the CME.
“Recent income flows can certainly be attributed to underlying trading, but the overall number-based trading is less than 15% of the total ETF flow,” said crypto trader Joseph B.
Pal said he knows these firms' flows are primarily arbitrage, because “that's what the major listed hedge funds do.” They are not really directional risk takers” – traders who make decisions based on the expected direction of Bitcoin's price.
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Arbitrage trading involves spotting short-term opportunities by finding the difference between a spot Bitcoin ETF and the price of Bitcoin.
“One thing that jumps off the page when you read through this list is that most of these people are not ‘buy and hold' investors,” added Deep Q Digital CEO Carlos Zendejas.
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This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
