Bitcoin’s $1.5 billion outflow trend has come to a halt, but the trading activity that is generating inflows may be at risk of disappearing under strain.

On February 2, US spot Bitcoin exchange-traded funds experienced net inflows of $561.8 million, concluding a four-day period that saw nearly $1.5 billion in outflows.

While investors might view this figure as a sign of renewed confidence following significant outflows, Jamie Coutts, chief crypto analyst at Real Vision, provided an alternative perspective.

He stated:

“Aggregate ETF flows are not indicative of buying the dip. Net institutional demand is primarily coming from a diminishing group of Treasury-style buyers with limited balance-sheet capacity. This situation is not sustainable under ongoing pressure. A lasting Bitcoin bottom likely necessitates these participants to change their positioning — not merely reduce their selling.”

This distinction is crucial because ETF inflows reflect net share creation in the primary market, rather than indicating whether the marginal buyer is taking on directional Bitcoin risk.

A positive flow figure can signify either risk-on conviction or risk-off positioning disguised as demand. The differentiation depends on the actions in the derivatives market immediately following the creation of those ETF shares.

Flows do not equal exposure

Creations and redemptions of exchange-traded funds are carried out by authorized participants, which are large institutions that maintain ETF prices close to net asset value through arbitrage.

When an ETF trades at a premium or discount to its underlying assets, authorized participants can benefit by creating or redeeming shares. This activity manifests as “flows” even when the initiating trade is driven by market structure rather than a macro dip-buying strategy.

Moreover, inflows can represent the spot leg of a delta-neutral basis trade.

Banque de France specifically notes hedge funds taking advantage of the futures-spot basis by shorting futures and hedging with long spot exposure through Bitcoin ETF shares.

The central bank highlights that basis ranges and annualized equivalents make this trade appealing when volatility and margin costs are stable. CME Group defines basis trading as the simultaneous holding of opposing spot and futures positions to create delta-neutral exposure, with returns arising from basis convergence rather than Bitcoin’s price fluctuations.

In practice, this implies that an institution can purchase ETF shares and promptly sell Bitcoin futures or perpetual swaps.

The outcome resembles institutional demand in headline flow figures, while being economically closer to a carry book than a risk-on investment. The institution profits from the spread between spot and futures prices as they converge, earning an implied yield subject to margin and risk constraints.

US spot Bitcoin ETF flows recorded $561.8 million in net inflows on February 2, following approximately $1.5 billion in outflows over the previous four trading days while Bitcoin’s price continued to decline.

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Five reasons inflows increase without dip buying

Cash-and-carry or basis trades exemplify this phenomenon.

Taking a long position in ETF shares while shorting futures or perpetual swaps to achieve basis convergence generates flows that may appear bullish, even as net delta exposure remains close to zero.

Arbitrage by authorized participants adds another dimension. Creations and redemptions occur because the ETF traded away from net asset value, not necessarily because there is a desire for Bitcoin exposure.

The flow is a settlement artifact of a pricing discrepancy, not a speculative bet.

Liquidity provision and inventory rebalancing can create similar distortions. Market makers might issue shares to satisfy secondary market demand while hedging elsewhere. The flow appears, but the price support dissipates if the hedge offsets the spot buying.

Cross-venue hedging can directly counteract spot buying pressure. Spot purchases to create ETF shares can be balanced by futures selling or options hedges, diminishing the “price floor” effect even with positive flow figures.

Buyers constrained by balance sheets, who dominate marginal demand, introduce fragility.

If the primary bid originates from a smaller group of carry players, inflows become sporadic and susceptible to risk-off conditions. This aligns with Coutts’ assertion of “not sustainable under continued pressure.”

What the positioning data reveals

The Commodity Futures Trading Commission’s CME Bitcoin futures report indicates significant gross longs and shorts among non-commercial participants, along with substantial spread positions.

This aligns with the presence of systematic relative-value activity in the market, which is expected if a significant portion of “institutional demand” is hedged rather than directional.

The Banque de France provides basis ranges and annualized equivalents that clarify the underlying economics.

When the anticipated carry, calculated as futures basis minus financing costs, fees, and margin haircuts, is appealing and volatility remains stable, carry buyers expand the trade and ETF inflows increase.

Conversely, when volatility surges or margins rise, or when basis collapses, they de-risk, and flows can quickly turn negative.

This creates a forward-looking distinction. A genuine bottoming process would exhibit basis compression and a reduction in futures shorts through covering while ETF inflows persist.

This would indicate that inflows are beginning to signify net delta demand rather than merely carry.

A false signal appears differently: inflows continue but are matched by rising hedges in futures and perpetual swap markets.

The market receives flow headlines without lasting spot support, and any renewed selling pressure prompts an unwind.

Coutts’ assertion suggests that the latter scenario prevails until proven otherwise.

When inflows truly matter

The most definitive test of whether inflows indicate conviction rather than carry is to analyze the activity in derivatives markets.

If ETF inflows are positive while hedges are unwinding, such as basis compressing, futures shorts, and spread positions declining, and open interest behavior supports the de-risking of carry books, then the inflows likely represent net new demand.

If inflows are positive while futures shorts increase or remain high, and open interest expands in ways consistent with hedging activity, and basis remains wide enough to justify the trade, the flows are plumbing, not positioning.

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

When the ETF trades close to NAV, creations are more likely to be mechanical inventory management or basis-trade execution rather than panic bottom-fishing by conviction buyers.

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

Liquidations had reached $2.56 billion in recent days, according to CoinGlass data. Broader market sentiment had soured due to macro risk-off factors, including the Kevin Warsh Fed chair nomination and Microsoft’s Azure growth disappointment.

In this context, a single day of positive flows does not confirm that buyers entered with conviction.

It demonstrates that authorized participants created shares. Whether those shares signify directional exposure or the spot leg of a delta-neutral trade determines if the flows provide price support or merely mask carry activity as demand.

If ETF inflows are…	And derivatives look like…	Most likely interpretation	What you’d expect next
Positive	Basis compressing, futures shorts/spread positions fall, OI flat/down, options skew normalizing	Conviction / net delta demand (dip buying)	Better spot follow-through; supports hold
Positive	Basis stays wide, futures shorts/spreads rise, OI up, downside hedging persistent	Carry / basis trade (delta-neutral)	Price can stay heavy; flows flip fast if volatility/margins worsen
Positive	ETF premium/discount moves trigger creations; derivatives unchanged	AP arbitrage / plumbing	Weak predictive power for direction
Negative	Basis collapses + OI falls	De-risking / carry unwind	Volatility spikes; sharper downside possible

The sustainability question

Coutts’ characterization of the remaining demand as originating from a diminishing group of Treasury-style buyers with limited balance sheet capacity indicates a structural constraint.

Basis trades are intensive on balance sheets. Institutions employing these strategies face margin requirements, leverage limits, and risk concentrations that restrict their scaling capacity.

If the marginal bid arises from this group rather than from conviction-driven allocators, then each additional dollar of inflow necessitates more capital and heightens fragility.

A sustainable bottom likely requires a regime shift in which these participants reverse their positioning, not just slow their selling, and where unhedged directional buyers return in significant numbers. Until that occurs, positive flow days may coexist with ongoing price pressure.

The flows indicate plumbing. The price reflects whether anyone is genuinely buying the dip.

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