10x Research: The Bitcoin ETF Market—56% Is Arbitrage

Total net inflows have surged to $39 billion since launch, yet only $17.5 billion of that capital is committed to long-term holdings. The other 56%? It’s all about arbitrage—investors hedging by simultaneously buying spot Bitcoin and shorting futures, ensuring profits regardless of price fluctuations.

Contrary to the bullish narrative pushed by some crypto proponents, actual demand for Bitcoin as a long-term asset appears much weaker. Institutional giants like BlackRock and Fidelity aren’t taking direct bets on BTC’s future; instead, they leverage arbitrage strategies, exploit inefficiencies, and profit from market spreads.

Rather than reflecting broad-based institutional adoption, the buying and selling of Bitcoin ETFs is primarily driven by funding rates (basis rate opportunities), with many investors focusing on short-term arbitrage rather than long-term capital appreciation,

Thielen explains.

Current funding rates and arbitrage spreads have dropped to levels that no longer offer significant profit opportunities. This has led hedge funds and investment firms, which once relied on these strategies, to scale back their positions. Over the past week, Bitcoin ETFs recorded a net capital outflow of more than $552 million, according to SoSoValue.

Yet, from a macro perspective, the overall market capitalization of spot Bitcoin ETFs has remained steady since January 2025. Thielen emphasizes that closing arbitrage positions doesn’t always signal weakening demand—on the contrary, actual Bitcoin purchases via ETFs have been steadily increasing in recent months.

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