Bitcoin
Bitcoin ETFs are breaking records. See why the price doesn’t change – DL News
- Bitcoin ETFs have experienced a record 20-day inflow streak.
- But the price of Bitcoin remained stagnant.
- This is because hedge funds may be offsetting their ETF purchases with short positions.
Spot Bitcoin exchange-traded funds are hoovering up funds like there is no tomorrow.
However, the price of Bitcoin is not increasing. For almost a month now, the top cryptocurrency has been trading in a tight range between $67,000 and $72,000.
Wintermute Crypto Market Maker offered an explanation in his latest report. The problem, the firm said, is that hedge funds buying ETF shares could very well be selling the asset elsewhere.
$100 billion in assets
Bitcoin ETFs have seen inflows for 19 consecutive days since yesterday – a new record.
And last week, Bitcoin investment vehicles accumulated nearly $2 billion globally, bringing crypto assets under management to the $100 billion mark for the first time since March.
But even so, Bitcoin still trades at $69,000, the same price as mid-May.
CME, the largest platform in terms of Bitcoin derivatives volume, offers a clue as to 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 Bitcoin bearish.
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By combining short positions with potential Bitcoin ETF exposure, hedge funds can profit from crypto market inefficiencies, Wintermute said.
These funds are probably targeting the discrepancies between the spot price of Bitcoin in ETFs and its futures on the CME exchange.
This strategy is considered market neutral, meaning companies are not making a directional bet on the price of Bitcoin – they are simply arbitraging the asset in different locations.
Hedge Fund Strategies
Hedge fund Millennium Management, which manages around US$60 billion, probably had implemented such a strategy along with other peers when it purchased over $2 billion for Bitcoin ETFs in May.
In other words, these flows are purposely combated elsewhere by the same institutions that acquired the shares.
“The impact of recent changes in market structure is becoming evident, especially with subdued price action despite significant ETF inflows,” Wintermute said. “Markets remain limited.”
Crypto Market Movers
- Bitcoin fell 3.2% in the last 24 hours to around $67,145.
- Ethereum fell 3.7% over the same period to $3,537.
What are we reading
Tom Carreras is markets correspondent for DL News. Do you have any tips on Bitcoin ETFs? Get in touch at tcarreras@dlnews.com