Shift in Bitcoin Investment Strategies: Large Investors Opt for Long-Term ETF Bets
Large institutional investors are reducing arbitrage positions in favor of direct bullish bets on Bitcoin, according to recent data from SoSoValue. This shift represents a move away from traditional “Cash-and-Carry” arbitrage strategies toward directional long-term positions. 
The Cash-and-Carry arbitrage strategy involves purchasing spot Bitcoin ETFs while shorting Bitcoin futures to profit from pricing mismatches between spot and futures markets.
Net Inflows in U.S.-Listed Bitcoin ETFs
U.S.-listed Bitcoin (BTC) Exchange-Traded Funds have recorded net inflows this month, reversing December’s redemption trend, the data showed. This change in investor behavior is significant, as it indicates a growing preference for long-term exposure to Bitcoin over short-term arbitrage opportunities. The total number of open standard and micro Bitcoin futures contracts on the Chicago Mercantile Exchange has surged, further supporting the notion that investors are becoming more bullish on the cryptocurrency.
The “basis”—the price gap between CME futures and spot ETFs—has narrowed to levels that barely cover transaction costs and funding expenses, making carry trades less attractive, analysts said. This reduction in the basis, combined with low volatility in the Bitcoin market, has diminished the profitability of Cash-and-Carry trades, prompting investors to seek alternative strategies.
Low Volatility and Its Impact on Investment Decisions
Bitcoin has experienced low volatility since its sharp decline from its all-time high in October 2021, with prices trading within a narrow range recently. The low volatility environment reduces the likelihood of price mismatches between spot and futures markets, diminishing the profitability of Cash-and-Carry trades. Bitcoin’s annualized 30-day implied volatility, as measured by Volmex’s BVIV index, has fallen to a multi-month low in market expectations for price swings, according to analysts at cryptocurrency exchange Bitfinex.
Bitfinex analysts characterized the new investors as “sticky” because they view Bitcoin as a long-term investment rather than focusing on short-term profits from price gaps, citing reduced volatility as a factor. Data on short positions in CME-listed Bitcoin futures indicates that the increase in open interest stems from speculators betting on bullish outcomes rather than hedging with shorts, suggesting an overall increase in bullish exposure, according to the analysis.
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