A notable shift in investor behavior is unfolding in the U.S. spot Bitcoin exchange-traded fund (ETF) market, signaling a potential resurgence of institutional engagement. After several weeks of muted activity and minimal inflows, these investment vehicles experienced a significant uptick in demand, driven primarily by the return of a key market-neutral trading strategy favored by professional firms.
On Monday, U.S. spot Bitcoin ETFs collectively recorded substantial net inflows totaling $667.4 million. This marked the highest single-day total observed in over two weeks, indicating renewed investor confidence and positioning within the sector. Leading this surge was BlackRock’s iShares Bitcoin Trust (IBIT), which accounted for a significant portion of the inflows, absorbing $306 million during the day.
The Return of Basis Trading
At the core of this revitalized interest is the comeback of the “basis trading” strategy. This sophisticated approach involves simultaneously taking a long position in a spot Bitcoin ETF while executing a short position in Bitcoin futures contracts, typically on the CME exchange. The goal is to profit from the difference, or “basis,” between the spot price reflected in the ETF and the futures price, rather than betting on the direction of Bitcoin’s price itself.
The profitability of this strategy had waned considerably earlier in the second quarter, with the annualized yield dropping to around 4.5% in April. However, market dynamics have since changed, and the yield from basis trading has nearly doubled, now standing at approximately 9%.
Market observers, including analyst James Van Straten, highlight this improved yield as the primary magnet for professional capital. He noted that “Yields are back at levels that attract institutional investors,” signaling a clear turnaround from the uncertainty seen just a month prior.
Supporting Market Data
The renewed enthusiasm was also reflected in related markets. Trading volume for Bitcoin futures on the CME exchange escalated to $8.4 billion, marking the highest level recorded since late April. Furthermore, CME Bitcoin futures open interest also saw expansion, growing by over 30,000 contracts from recent lows to reach 158,000.
While these metrics may still trail their peak levels reached earlier in the year, the recent upward trend in both volume and open interest on CME is a strong indicator of renewed activity among professional traders who had previously scaled back their exposure. For instance, regulatory filings indicated that the Wisconsin state pension fund had divested its BTC ETF holdings earlier this year, potentially influenced by the less appealing arbitrage spreads prevalent at that time.
Analysts suggest that with the re-expansion of these spreads and the subsequent increase in basis trading yield, conditions are now favorable for greater institutional engagement throughout the second quarter, as they actively seek yield opportunities within this revitalized arbitrage landscape.
Jason Walker, aka “Crypto Maverick,” is the energetic new member of cryptovista360.com. With a background in digital finance and a passion for blockchain, he makes complex crypto topics engaging and accessible. His mix of analysis and humor simplifies volatile market trends. Outside work, Jason explores tech, enjoys spontaneous road trips, and American cuisine. Crypto Maverick is ready to guide you through the ever-changing crypto landscape with insight and a smile.