ETF Inflows appear to be a part of non-direction cash and carry strategy and do not necessarily represent outright bullish bets.That starkly contrasts with the first quarter when prices surged as ETFs drew in billions. Back then, most traders likely placed bullish directional bets through ETFs.
The bi-legged strategy, popularly known as cash and carry arbitrage, aims to profit from the premium in the futures market relative to the spot market. Traders seem to be shorting bitcoin futures on the regulated Chicago Mercantile Exchange while taking long positions in ETFs. As of last week, hedge funds and commodity trading advisers, categorized by the Commodities Futures Trading Commission, held record net short position of 18,175 contracts, according to data source QuickStrike.
A similar conclusion can be drawn from the fact that open interest, or the dollar value dedicated to active CME bitcoin futures contracts sized at 5 BTC, has grown in tandem with the cumulative ETF inflows. In other words, record shorts aren't necessarily outright bearish bets and ETF inflows don't necessarily represent outright bullish bets. Both constitute a non-directional strategy, leaving the cryptocurrency's price directionless.Per BitMEX Research, large bitcoin ETF holders like Millennium and Schonfeld are likely involved in the cash and carry arbitrage .
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