Institutional investors are driving the majority of net inflows into spot Bitcoin exchange-traded funds (ETFs), with arbitrage transactions playing a significant role in shaping market dynamics. This is according to Real Vision CEO Raoul Pal, who suggests that hedge funds are the primary holders of U.S. Bitcoin ETFs.

Arbitrage and Institutional Dominance

Data indicates that hedge funds are the primary holders of U.S. Bitcoin ETFs, with Markus Thielen, CEO of 10x Research, echoing Pal's sentiments. The top 80 holders of spot Bitcoin ETF shares collectively manage around $10.26 billion, making up roughly two-thirds of the $15.42 billion in net inflows since the launch of these ETFs on January 11.

International Hedge Funds Lead the Way

Notably, international hedge fund Millennium Management leads with $1.94 billion in Bitcoin ETF shares, diversified across multiple issuers including Bitwise, Grayscale, Fidelity, BlackRock, ARK, and 21Shares.

Recent Outflows and Market Caution

The timing of critiques like Pal's is significant as it coincides with notable outflows from U.S. Spot Bitcoin ETFs. On June 11, these ETFs experienced a collective outflux of $200.4 million, interrupting the robust inflows of recent weeks and signaling growing investor caution. This retreat is particularly evident in the Grayscale Bitcoin Trust (GBTC), which saw $121 million withdrawn, and the ARK 21Shares Bitcoin ETF ARKB, with $56.5 million exiting.

Crypto Trader Insights

Crypto trader Joseph B. noted that while recent inflows might be attributed to the basis trade, this strategy constitutes less than 15% of overall ETF flows. Pal's observation underscores that major hedge funds engaging in these ETFs primarily focus on arbitrage rather than taking directional risks based on Bitcoin's price movements.