ETF Inflows Spark Uncertainty Over Institutional Demand for Crypto
Billions of dollars are flowing into Bitcoin exchange-traded funds (ETFs), but it's unclear how much of that demand comes from institutions, according to CoinShares. The company's head of research, James Butterfill, said about $4.1 billion poured into US crypto investment products in September, with BlackRock's iShares Bitcoin Trust ETF (IBIT) accounting for more than 53% of those inflows.
However, Butterfill noted that it's challenging to distinguish between institutional and retail money when looking at ETF buying, as it can also reflect arbitrage strategies or bets on rising Bitcoin prices. He pointed out that many investors use IBIT for the Bitcoin basis trade, which involves buying shares of a spot Bitcoin ETF while shorting Bitcoin futures.
The strategy aims to profit from the difference between spot and futures prices as they converge, with an attractive yield currently at 6%. According to Butterfill, month-to-date IBIT has seen over 53% of the $4.1 billion inflows.
More recent CoinShares data showed that September inflows into US crypto investment products had risen to about $4.44 billion, with Bitcoin (BTC) products leading the way at $2.84 billion. Ether (ETH) and Zcash (ZEC) also attracted significant interest, with around $946 million and $284 million flowing in respectively.
Butterfill also highlighted growing investor interest in companies that profit from crypto adoption, estimating that stablecoin assets could approach $4 trillion by the end of the decade. He pointed to Hyperliquid's daily trading volume reaching up to $9 billion as a key indicator of this trend.