Bitcoin ETF Inflows Leave Institutional Demand Unclear

Billions are flowing back into Bitcoin exchange-traded funds (ETFs), but the figures alone do not reveal how much of the demand comes from institutions, according to CoinShares.

US crypto investment products had attracted about $4.1 billion in September, with BlackRock’s iShares Bitcoin Trust ETF (IBIT) accounting for more than 53% of those inflows, CoinShares head of research James Butterfill told Cointelegraph.

Crypto investment products attracted about $3.5 billion across the industry over the preceding five trading days, CoinShares said in a Sept. 25 market update.

Asked whether institutional investors were returning to crypto, Butterfill said, “Potentially yes, but in the ETF world it is very difficult to disaggregate institutional and retail money.”

ETF buying can reflect arbitrage strategies as well as bets on rising Bitcoin prices, making inflows an imperfect measure of bullish conviction. Butterfill also sees investors looking beyond tokens to businesses that profit from crypto adoption.

IBIT offers clues to institutional demand

Butterfill said many institutional investors use IBIT for the Bitcoin basis trade.

The strategy involves buying shares of a spot Bitcoin ETF while shorting Bitcoin futures, with the aim of profiting from the difference between spot and futures prices as they converge.

“At the moment the basis trade has an attractive yield at 6%, and month to date IBIT has seen over 53% of the $4.1 billion inflows,” Butterfill said.

The figures suggest positive sentiment is broad-based across both institutional and retail investors, he added.

More recent CoinShares data shared with Cointelegraph showed September inflows into US crypto investment products had risen to about $4.44 billion, compared with $4.53 billion globally. Bitcoin (BTC) products led inflows with $2.84 billion, followed by Ether (ETH) with around $946 million, while Zcash (ZEC) ranked third with $284 million.

CoinShares points to digital asset rotation

Butterfill also pointed to growing investor interest in companies that make money from crypto adoption.

“The rotation within digital assets deserves more attention,” he said, pointing to early-September CoinShares data that showed more than $100 million flowing into blockchain equities over the preceding month.

Related: US crypto ETF inflows cool after $3.3B week but streaks hold

Butterfill expects investors to pay close attention over the next year to which businesses generate revenue from tokenization, payments and trading infrastructure as those markets expand.

He pointed to estimates that stablecoin assets could approach $4 trillion by the end of the decade, and said that Hyperliquid was recording up to $9 billion in daily trading volume.

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