A recent JPMorgan report has suggested that the cryptocurrency space has seen net inflows of $12 billion so far this year, and notes that if flows keep growing as they have so far the figure could reach the $26 billion mark by year end.

However the true picture may be less rosy than it appears as while actual inflows have increased, some of these funds may have simply rotated from cryptocurrency wallets onto the newly launched spot Bitcoin exchange-traded funds (ETFs), which have attracted $16 billion of net inflows so far.

The report, led by analyst Nikolaos Panigirtzoglou, highlights a decline in Bitcoin reserves across spot cryptocurrency exchanges since the launch of spot Bitcoin ETFs, which is now estimated to be at 220,000 BTC or $13 billion, as CoinDesk reported. The analysts wrote:

This implies that the majority of the $16 billion inflow into spot bitcoin ETFs since launch likely reflects a rotation from existing digital wallets on exchanges.

Taking this rotation into account, JPMorgan revises the net inflow for digital assets down to $12 billion. While this figure remains stronger than last year’s, it falls short of the highs seen during the 2021-2022 crypto bull run.

As CryptoGlobe reported, institutional investors have been showing significant interest in market-neutral Bitcoin strategies, with a record high in short positions in BTC futures contracts reflecting that trend.

That strategy, known as the basis trade, sees investors seek a profit off of the price discrepancies seen in spot and futures markets as by simultaneously buying Bitcoin in the spot market and selling futures contracts at a premium traders can profit while holding a market-neutral position.

The launch of spot Bitcoin exchange-traded funds in the United States fueled the popularity of the basis trade, allowing investors to gain exposure to Bitcoin without directly holding it, while the price premium on futures contracts creates an arbitrage opportunity.

Investors can buy the ETF and simultaneously sell futures, profiting from the difference as the futures price adjusts. This cash-and-carry strategy has become easier to execute with the advent of ETFs, which are traded through regulated brokers.

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