by Coinstrooper Crypto Articles
Quick Take
  • Institutional inflows into spot Bitcoin ETFs have been one of the biggest storylines since their launch last year.
  • With Bitcoin hitting new highs in 2025 and ETF assets surging, many assume big Wall Street players are finally “long Bitcoin.”
  • Instead, he says, the biggest players are running a straightforward arbitrage trade.
  • Capture the yield difference between the ETF and futures (the basis)

What Happened

Institutional inflows into spot Bitcoin ETFs have been one of the biggest storylines since their launch last year. With Bitcoin hitting new highs in 2025 and ETF assets surging, many assume big Wall Street players are finally “long Bitcoin.”

Retail investors often misinterpret these flows, which can amplify market volatility.

Market Context

Hayes points to the ETF’s largest holders, hedge funds and bank trading desks, including firms like Goldman Sachs, and argues they are primarily engaged in what’s known as a basis trade.

Capture the yield difference between the ETF and futures (the basis)

This has become even more common in 2025 as US rates have fallen, with the Federal Reserve cutting rates three times this year, reducing yields across traditional markets and making arbitrage opportunities more attractive.

Earlier this year, Bitcoin rose steadily even as dollar liquidity tightened under the incoming Trump administration and US Treasury issuance surged. ETF inflows and buying from digital asset trusts helped offset the liquidity drag.

Why It Matters

But Hayes argues that that phase may be over.

Details

But not so fast, says Arthur Hayes.

In an email sent Monday, the BitMEX co-founder argues that much of the institutional activity inside BlackRock’s IBIT, still the largest Bitcoin ETF by assets, has nothing to do with long-term conviction. Instead, he says, the biggest players are running a straightforward arbitrage trade.

“They Are Not Long Bitcoin”

Here’s how it works:

Funds buy IBIT ETF shares

Simultaneously short CME Bitcoin futures

Use the ETF shares as collateral for the futures short

According to Hayes:

“They are not long Bitcoin. They only play in our sandbox for a few extra points over Fed Funds.”

Why ETF Inflows Can Be Misleading

When the basis is high enough, hedge funds rush into the trade, creating the appearance of large institutional inflows.When the basis compresses, as it has several times throughout 2025, those same institutions unwind the trade, causing sharp ETF outflows.

Hayes says this dynamic creates a dangerous illusion, and it plays out like this:

When the basis spikes → ETF inflows surge → “Institutions are buying Bitcoin!”

When the basis collapses → ETF outflows spike → “Institutions are dumping Bitcoin!”

What Changed in 2025

Several digital asset trusts (DATs) have traded below NAV this autumn.

The ETF basis trade has become less attractive as futures spreads narrowed.

Hedge funds have reduced their positions, triggering noticeable outflows across the ETF complex for weeks at a time.