BTC ETF Net Flow
Last updated
Last updated
BTC ETF Net Flow measures the net inflows (or outflows) of U.S.-listed BTC ETFs. CoinKarma tracks the daily net flow data for 10 BTC ETFs traded in the U.S. market.
CoinKarma includes this indicator because historical analysis reveals that a portion of BTC ETF inflows originates from arbitrage trades, which have limited direct impact on price trends. This challenges the intuitive notion that net inflows signal bullishness, while net outflows signal bearishness. Instead, BTC ETF Net Flow can provide insights into sentiment in the futures market.
The following illustrates how U.S. investors use BTC ETFs for arbitrage:
When market sentiment is bullish (overheated): Futures premiums rise, prompting arbitrage traders to buy BTC ETFs while shorting CME futures.
When market sentiment is bearish (fearful): Futures premiums decline, leading arbitrage traders to sell BTC ETFs and close their CME shorts.
Observation: At market tops, CME open interest typically spikes (corresponding to hedge funds increasing net short positions). After sharp market corrections, CME open interest declines alongside the market.
These arbitrage traders don’t need to wait until futures expire to close their positions. They profit by shorting during market FOMO and closing their shorts during panic sell-offs as market sentiment oscillates.
IBIT, due to its investor profile and lower fees, is particularly favored by arbitrage traders. While other ETFs exhibit similar behavior, their scale is far smaller compared to IBIT. By comparing IBIT’s net flows with BTC price movements, we observe that:
Net outflows or a halt in inflows of IBIT funds (indicating short positions being closed and ETF holdings being sold) often coincide with short-term market bottoms.
