Recently, U.S.-listed spot Bitcoin exchange-traded funds (ETFs) have experienced a resurgence in popularity, attracting an impressive $1.4 billion from investors over the last five days. Despite this influx of capital, Bitcoin’s spot price remains relatively stagnant.
Experts at the cryptocurrency exchange Bitfinex suggest that beyond geopolitical unrest and rising oil prices, the inherent structure of ETFs themselves might explain this phenomenon.
In correspondence with CoinDesk, analysts highlighted that inflows into ETFs should not be immediately equated with direct demand for Bitcoin on the spot market. The design of these ETFs often causes a delay between when funds are invested and when actual Bitcoin purchases occur. Consequently, any upward pressure on prices may only materialize after some time has passed, leaving current prices seemingly stuck.
An ETF operates as a collective investment fund holding assets like Bitcoin and issues shares traded on stock exchanges similar to traditional stocks. Each share corresponds to ownership rights over the underlying assets. Since January 2024, eleven spot ETFs have launched in the U.S., collectively drawing more than $55 billion in investments so far.
The creation and redemption of ETF shares are managed by authorized participants (APs), which include major banks, market makers, or broker-dealers. When demand for an ETF increases causing its trading price to exceed its net asset value (NAV), APs step in by creating new shares and selling them to close this gap.
Interestingly, APs often engage in short-selling—selling shares they do not yet own—to facilitate these transactions quickly. Unlike general market rules requiring borrowing before shorting securities, regulators permit APs to short ETF shares almost instantly while purchasing corresponding Bitcoins hours later or by the next business day depending on whether creations happen via cash or in-kind methods.
This mechanism means that even if ETF demand surges sharply today, actual buying activity for Bitcoins on spot markets may lag behind significantly. By the time those real purchases occur they might be counterbalanced by selling pressures elsewhere within crypto markets—dampening any immediate bullish effect and keeping Bitcoin’s price range narrow.
This dynamic likely clarifies why recent substantial inflows into these ETFs haven’t translated into strong upward moves for Bitcoin itself according to Bitfinex analysts.
“The outcome is an expanding ETF size without corresponding increases in actual Bitcoin purchases,” they explained. “This can cause BTC prices to feel constrained or suppressed.”
The experts further noted: “While generally such discrepancies don’t cause major disruptions across markets; during times of extreme volatility or dislocation between ETF demand versus real BTC buying—or vice versa—it can briefly lead to mispricing within crypto markets.”