According to Matrixport’s latest weekly report, Bitcoin ETFs are increasingly influenced by global liquidity trends, central bank policies, and institutional capital flows as Wall Street deepens its exposure to the cryptocurrency market. The report highlights that a strengthening U.S. dollar and declining global liquidity have contributed to Bitcoin's recent pullback, with analysts predicting potential downside pressure until March or April 2025 before a recovery attempt.
Wall Street’s Role in Bitcoin ETF Dynamics
The report categorizes institutional Bitcoin investors into two distinct groups:
Wealth and Asset Managers: Representing wallets holding 100–1,000 BTC, this group has overtaken traditional whale wallets as the largest Bitcoin holders, signaling long-term strategic interest in Bitcoin.
Hedge Funds Engaged in Arbitrage: These funds do not necessarily bet on Bitcoin’s long-term appreciation but instead exploit arbitrage opportunities by shorting Bitcoin futures while buying Bitcoin spot or ETFs, profiting from funding rate differentials.
Hedge Fund Activity and Bitcoin ETF Outflows
The report reveals that hedge funds collectively hold around $10 billion in Bitcoin ETFs, while total inflows have reached $39 billion, meaning at least 25% of ETF funds are tied to arbitrage strategies rather than long-term conviction. Furthermore, 55% or more of ETF inflows may be linked to these non-directional hedge fund trades.
However, since the FOMC meeting in December 2024, declining profit margins have reduced arbitrage opportunities, leading to a slowdown in trading volume and record Bitcoin ETF outflows as hedge funds unwind their positions. This trend has intensified Bitcoin’s recent price correction, reinforcing the correlation between Bitcoin ETFs and macroeconomic conditions.
Looking Ahead: Will Bitcoin Rebound?
The report suggests that Bitcoin’s pullback may persist through March or April before attempting to reclaim previous highs. Global liquidity trends and Federal Reserve policy decisions will likely play a crucial role in determining Bitcoin’s trajectory, making the next few months critical for Bitcoin ETF investors.
