2024 Bitcoin ETFs: Record Inflows, Basis Trades, and the Growing Impact on Crypto Liquidity

In 2024, Bitcoin (BTC) exchange-traded funds (ETFs) have captured significant media attention, and for good reason—they’ve marked the most successful ETF launch in history. Since their debut on January 11, Bitcoin ETFs have attracted a staggering $18.9 billion in net inflows, based on Farside data. These ETFs, excluding the well-known Grayscale Bitcoin Trust (GBTC), collectively hold 646,000 BTC, while GBTC itself retains an additional 223,000 BTC. Altogether, ETFs now account for 869,000 BTC, representing about 4% of Bitcoin’s total circulating supply.

This year’s launch of Bitcoin ETFs has seen major milestones, particularly within the context of the ETF market, which witnessed 2,000 ETF launches this decade. Among the top performers in terms of assets are iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC), according to Bloomberg’s Senior Analyst Eric Balchunas. However, despite these achievements, ETFs remain a relatively small player in Bitcoin’s overall trading landscape.

Data from Checkonchain reveals that on October 11, the futures market for Bitcoin recorded $53.4 billion in trades, while the spot market traded $4.5 billion. In contrast, ETF trading volume reached $2 billion, which only accounted for 3% of total Bitcoin market activity that day. A significant part of ETF inflows might be tied to the “basis trade,” a market-neutral strategy where investors profit by going long on Bitcoin while shorting futures contracts, capturing the premium difference between spot and futures prices.

Prominent financial institutions like Goldman Sachs and Jane Street Capital have emerged as key participants in this space, facilitating ETF creation and redemption. Meanwhile, hedge funds such as Millenium Management are likely employing these ETFs for basis trades. Notably, the State of Wisconsin Investment Board remains a significant holder not involved in such strategies. As liquidity grows within the ETF market, more institutions could adopt long-term positions, especially with the possible approval of physically settled options linked to ETFs, adding new layers of participation for investors. These developments suggest that ETFs are poised to become an even larger component of the Bitcoin ecosystem, offering greater liquidity and diversified trading strategies.

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