The U.S.-listed spot bitcoin
One possible explanation, aside from escalating geopolitical tensions and oil price surge, is the mechanics of ETFs themselves, according to analysts at the cryptocurrency exchange Bitfinex.
Analysts explained in an email to CoinDesk that ETF inflows risk being over-interpreted as immediate spot demand, noting that ETF structures often create a lag between inflows and actual bitcoin purchases. In other words, the bullish pressure on prices can take effect with a lag, leaving prices stuck in the meantime.
An ETF is a pooled investment vehicle that holds assets such as bitcoin and issues shares that trade on stock exchanges like regular equities. The fund is designed to track the value of the underlying closely, and each share represents a claim to the underlying holdings. A total of 11 spot ETFs debuted in the U.S. in January 2024. Since then, these funds have cumulatively registered inflows worth over $55 billion.
The shares are created and redeemed by authorized participants (APs), specialized financial institutions such as large banks, market makers, or broker‑dealers. When demand for the ETF rises, its price can trade above the fund’s net asset value, prompting APs to create new shares, sell them to buyers, and narrow the price gap.
Often, APs sell shares they do not yet own – a process known as shorting. In general markets, short‑selling rules require most investors to borrow shares first, but regulators allow APs to short ETF shares almost immediately and buy corresponding bitcoin hours later or until the next business day, depending on whether creations are done in cash or in-kind.
As a result, ETF demand can rise even while actual BTC buying in the spot market is delayed. By the time those actual BTC purchases take place, they are often offset by other selling pressure elsewhere in the market, which can help mitigate the bullish impact on price and keep Bitcoin trading in a tighter range.
This likely helps explain the recent surge in inflows alongside the lackluster price action, according to Bitfinex’s analysts.
“The result is that the ETF grows, but the actual BTC price doesn’t rise because there has been no buying in the spot market. This can make the BTC price feel ‘stuck’ or suppressed,” analysts said.
“Generally, this does not have a significant market impact, but in periods of severe market dislocation, the gap between ETF demand and real BTC spot buying, or vice-verse, can create a short period of market mispricing,” analysts added.