This was due to the US-China tensions in trade and uncertainty about macroeconomic conditions. Analysts say that while some view the withdrawals as a negative signal, they’re more likely to be driven by arbitrage than long-term sales. Hong Kong’s HK Asia Holdings Limited has increased its Bitcoin holdings again, causing a spike in the stock price.
Bitcoin ETFs face record outflows in two weeks
According to data from Sosovalue, US-based exchange-traded Bitcoin funds experienced the largest two-week withdrawal ever after losing more than $1.1 billion in Bitcoin on Feb. 21. The withdrawals were the largest since ETFs began in 2024 on January 11. They also exceeded the previous record set two weeks prior to the 21st of June, when the outflows had reached $1.12billion and Bitcoin traded at $64,000. Investors’ concerns about the trade war between China and the United States have led to the recent decline in ETF flows.
Weekly Bitcoin exchange-traded fund flows ( SoSoValue )
It is also possible to see the sell-off of Bitcoin ETFs as an indicator for sentiment among large asset management companies. Marcin Kazmierczak is the co-founder of RedStone and its COO, Marcin Kazmierczak. He believes that ETF flow data provides valuable insights into Bitcoin demand among institutions.
He said that it is important to take a wider view when looking at long-term investing behavior, as ETFs are designed for longer holding periods. He said that evaluating flows over six months or one year gives a clearer picture.
Bitcoin ETF Flow (Farside Investors )
Recent selling was accompanied by growing geopolitical and economic concerns. Investors are particularly concerned about the new US import tariffs, and the uncertainly surrounding a possible meeting between Donald Trump’s former president and Chinese President Xi Jinping.
Trump has suggested that there may be a meeting, but he’s not provided a concrete timetable. This only increases investor anxiety. Market participants will likely remain cautious until there is clarity about the possibility of a trade agreement.
In addition to geopolitical concerns, expectations about monetary policies also affected Bitcoin ETF flow. Investor behavior is influenced by interest rate forecasts and regulatory changes, as well as market sentiment. Kazmierczak noted that while short-term withdrawals could indicate a weakening of sentiment, large institutional investors remain very committed to Bitcoin via ETFs.
He said that despite recent pressure to sell Bitcoin, entities such as the Abu Dhabi Sovereign Wealth Fund (ASWF) and Wisconsin Pension Fund still hold significant Bitcoin positions. The long-term investors suggest that, while ETF flows may be affected by short-term fluctuations, institutional trust in Bitcoin remains intact.
Bitcoin ETF inflows driven by arbitrage
10x Research has released a report that shows spot Bitcoin ETFs are primarily used for arbitrage rather than as long-term investment vehicles. Only 44% of the inflows were attributed to real purchases. Markus Thielen said that since their launch on January 2024, US spot Bitcoin ETFs have attracted $39 billion net inflows. However, only $17.5 billion represents positions held by long-only investors.
( 10x Research)
Around 56% of this inflow is due to arbitrage strategies, whereby investors reduce their risk by selling Bitcoin futures. Carry trades allow traders to benefit from the difference in price between futures and spot Bitcoin.
Thielen said that the reliance of arbitrage strategies on Bitcoin in multi-assets portfolios means actual demand is smaller long-term than commonly perceived. Bitcoin ETF activity is not driven by institutional demand, but rather funding rates and opportunities for short-term basis rates.
Thielen pointed out, too, that BlackRock’s IBIT is primarily held by hedge funds and traders who specialize in exploiting inefficiencies in the market and yield spreads instead of making long-term bets based on Bitcoin price. These firms have stopped new inflows of funds into Bitcoin ETFs, as funding rates and spreads are too low for them to be able to take arbitrage positions. They also started winding down existing positions which were no longer profitable. The result was four trading days in a row of withdrawals. Bitcoin’s price range remained relatively constant.
Media narratives often portray them as negative signals. Thielen explained that the movements were largely neutral for Bitcoin, as hedge funds sold ETFs and bought Bitcoin futures. This negated any significant directional effect on Bitcoin. Raoul Pal of Real Vision, the CEO of Real Vision in 2024 suggested that up to two thirds of Bitcoin ETF inflows could have been due to arbitrage trading.
Changes to market behaviour may still be coming. Thielen stated that since the US Presidential election there has been a rise in genuine Bitcoin long only purchases, which indicates increased investor confidence. Arbitrage strategies are less appealing as retail trading volume is declining, and funding rates have collapsed. Investors were compelled to close their positions.
HK Asia expands its Bitcoin holdings
HK Asia Holdings Limited increased its Bitcoin holdings from 7.88 BTC to almost 9 BTC just a few days after the initial cryptocurrency purchase that sparked a rise in Bitcoin’s share price. On February 23, the Hong Kong investment company announced that their board had approved an extra investment in Bitcoin after purchasing approximately 7,88 BTC for $761,705 on February 20. The latest purchase was made using internal funds, and brings the total Bitcoin assets of the firm to 8.88 BTC. This acquisition cost an average of $97,000 per coin.
Investors rushed into the stock after trading was resumed, following the firm’s purchase of Bitcoin of one BTC. By the end February 17, HK Asia had seen its share price soar by nearly 93%.
The company’s shares were trading around 6.60 Hong Kong Dollars (86 cents) on Feb. 24 during lunch time at the Hong Kong Stock Exchange. The stock could surpass its previous high of June 2019 if it maintains momentum. Stocks of this company have already risen by 1,700% in the past year.
HK Asia’s decision reflects a trend that is growing among publically traded companies who are acquiring Bitcoin to boost company profits. The board of directors of the company cited the growing popularity of cryptocurrency in the commercial sector as a major factor in its decision to purchase Bitcoin in an announcement made earlier. HK Asia, despite its purchase being under the threshold that requires disclosure, voluntarily disclosed the information to the public.
