Bitcoin ends $1.5 billion streak of outflows, but trades driving inflows may disappear under pressure

The US Spot Bitcoin exchange-traded fund recorded net inflows of $561.8 million on February 2, ending a four-day streak of outflows of nearly $1.5 billion.

Investors could interpret this number as a reinstatement of convictions after punishing the breach, but Jamie Coutts, chief crypto analyst at Real Vision, took a different view.

According to him:

“The ETF’s total flow is not push buying. Net institutional demand comes almost entirely from a shrinking group of Treasury-style buyers with balance sheet space left. That is not sustainable under continued pressure. For Bitcoin’s bottom to persist, these players will need to not only delay their selloffs, but reverse their positions.”

This distinction is important because ETF inflows measure net share creation in the primary market, not whether marginal buyers take on Bitcoin’s directional risk.

A positive flow print can represent risk-on conviction or risk-off positioning in response to demand. The difference depends on what happens in the derivatives market immediately after an ETF stock is created.

Flow is not exposure

The creation and redemption of exchange-traded funds is performed by authorized participants, which are large institutions that drive the ETF price closer to its net asset value through arbitrage.

If an ETF trades at a premium or discount to its underlying assets, authorized participants can profit by creating or redeeming shares. This movement manifests itself as “flow” even when the initiated trades are market structure driven rather than macro buys.

More importantly, the inflow could represent the spot leg of a delta neutral basis trade.

The Banque de France clearly explains that hedge funds are taking advantage of the futures spot basis by shorting futures and hedging with physical long exposure via Bitcoin ETF shares.

The central bank notes that the basis range and annualized value make the trade attractive when volatility and margin costs are stable. CME Group defines basis trading as simultaneously holding opposing spot and futures positions to create delta-neutral exposure that derives income from basis convergence rather than Bitcoin price fluctuations.

In practice, this means that institutions can buy ETF shares and immediately sell Bitcoin futures or perpetual swaps.

This result is similar to institutional demand in a headline flow print, but economically more similar to a carry book than a risk-on bet. The agency captures the spread between spot and futures prices when they converge and clips the implied yield, subject to margin and risk limits.

5 reasons why capital inflows increase even without market buying

Cash and carry or basis trading is the most obvious example.

Going long ETF stocks while shorting futures or perpetual swaps to achieve basis convergence will generate flows that appear bullish even though the net delta exposure remains close to zero.

Authorized participant arbitrage adds another layer. Creations and redemptions occur because the ETF trades away from its net asset value, not because someone wants Bitcoin exposure.

Flows are settlement artifacts of pricing discrepancies, not bets.

Liquidity provision and inventory rebalancing create similar distortions. Market makers may issue shares to meet secondary market demand while hedging elsewhere. Flows appear, but price support disappears as hedges offset spot buying.

Hedging between venues can directly offset spot buying pressure. Spot purchases to create ETF shares can be matched with futures sales or option hedges, reducing the “price floor” effect even with positive flow prints.

Balance sheet constrained buyers who monopolize marginal demand create vulnerability.

If the major bids come from a small number of carry players, the inflow will be temporary and prone to risk-off conditions. This is Coutts’ thesis that “it is not sustainable under continuous pressure.”

What the positioning data shows

The Commodity Futures Trading Commission’s CME Bitcoin Futures Report shows large aggregate long and short positions among non-commercial participants, as well as significant spread positions.

This is consistent with the systematic relative value activity that exists in the market, and is exactly what you would expect if a significant portion of “institutional demand” is hedged rather than directional.

Banque de France provides reference ranges and annualized values ​​to clarify the economic situation.

If the expected carry (the futures basis minus funding costs, fees, and margin haircuts) is attractive and volatility is stable, carry buyers will expand their trades and ETF inflows will increase.

If volatility spikes, margins increase, or basis collapses, the risk disappears and flows can quickly turn negative.

This creates a forward-looking distinction. A genuine bottoming process would show futures shorts decreasing through basis compression and covering while ETF inflows continue.

This would indicate that inflows are starting to represent net delta demand rather than just carry.

Fakeouts look different. Inflows continue, but are matched by rising hedging in futures and perpetual swap markets.

The market acquires a flow headline without sustained spot support and is forced to unwind if there is new selling pressure.

Coutts’ argument suggests that the second scenario is likely until proven otherwise.

When inflows actually matter

The clearest test of whether inflows reflect conviction rather than carry is to examine what is happening in the derivatives market.

If an ETF has positive inflows while hedge unwinding is underway, such as basis compression, futures shorts, or lower spread positions, and open interest behavior supports carry book risk aversion, the inflows are likely to represent net new demand.

If futures short interest increases or remains high while inflows are positive, open interest will grow in line with hedging activity and the basis will remain wide enough to justify trading. Flow is plumbing, not positioning.

ETF premiums and discounts to net asset value provide another signal.

When an ETF trades at a price close to its NAV, it is more likely to produce work through mechanical inventory management and basis trade execution, rather than panic bottom fishing by convinced buyers.

The $561.8 million inflow on February 2 arrived after Bitcoin had already fallen below $73,000. This move pushed Bitcoin below its 2024 all-time high of $73,777 and to its lowest level since the 2024 election.

According to data from Coinglass, the amount of liquidations in recent days reached $2.56 billion. Macro risk-off sentiment caused by the appointment of Kevin Warsh as Fed Chairman and disappointment with Microsoft’s Azure growth has soured the overall market.

In that context, one day’s positive flow does not prove that buyers have intervened with conviction.

This proves that an authorized participant created the share. Whether these stocks represent directional exposure or the spot leg of a delta-neutral trade will determine whether the flows provide price support or simply disguise carry activity as demand.

sustainability issues

Coutts’ framework that the remaining demand comes from a shrinking group of Treasury buyers with finite balance sheet capacity points to structural limits.

Basis trading focuses on the balance sheet. Financial institutions implementing these strategies face margin requirements, leverage limits, and risk concentrations that limit their ability to scale.

If marginal bids come from this group rather than belief-based allocators, each increase in inflow requires more capital and increases vulnerability.

Forming a sustained bottom will likely require a regime shift in which these parties not only delay selling but also reverse positions and unhedged directional buyers scale back. Until then, positive flow days are likely to coexist with continued price pressure.

Flow measures piping. Price measures whether someone is actually buying the push.