European bitcoin ETP outflows increase as institutional traders switch to US funds, analyst says

European bitcoin exchange-traded product outflows have increased following the recent introduction of spot BTC -4.30% ETFs in the U.S., an analyst said.

CoinShares Research Associate Luke Nolan indicated that this market shift highlights a trend wherein institutional traders in the U.S. are likely redirecting their investment strategies toward recently approved spot bitcoin ETFs.

"There has been a significant outflow from European bitcoin ETPs. Prior to the approval of multiple spot bitcoin ETFs , many U.S. institutions utilized European ETPs for nearly risk-free basis trades. However, with the recent approval of the new U.S. products, these institutions may find it more cost-effective or convenient to execute the same basis trades domestically," Nolan told The Block.

According to Nolan, these basis trades offer a relatively risk free trade for U.S. institutional investors.

"Investors in the U.S. were shorting bitcoin futures, but at the same time buying the underlying asset via European ETPs, ensuring they can close the contract and profit from the basis difference, which in this case is the premium above the underlying asset price that the futures price holds. However, they can now do the same domestically with spot bitcoin ETFs in a more convenient way," Nolan added.

In the context of futures trading, the basis represents the difference between the cash or spot price of an asset and the futures price for a specific contract.

 

Market shift after spot bitcoin ETF approval

Data from BitMEX Research that shows the four largest European bitcoin ETPs have experienced substantial outflows since the launch of spot bitcoin ETFs last week.

"Data is available for Europe, where people are switching away from the higher-fee bitcoin ETPs," BitMEX Research posted on X.com.

A notable surge in outflows from Canadian bitcoin ETPs has also been observed.

"In regards to Canadian bitcoin ETPs, it looks like U.S. investors who had ways to invest in Canadian ETPs are also switching to invest in the new U.S. funds," Nolan added.