Bitcoin Halved but ETF Holdings Remain Strong, Warning of a False Rally

▲ Bitcoin (BTC) Exchange-Traded Fund (ETF)

Even as Bitcoin (BTC) prices have plunged to half of their $120,000 peak in a devastating market downturn, spot exchange-traded funds (ETFs) have steadfastly held onto tens of billions of dollars in assets. However, a sober analysis suggests that this resilience may not necessarily be a simple bullish signal.

According to investment media outlet FXStreet on February 18 (local time), Markus Thielen, founder of 10x Research, said in a recent client memo that the reason spot Bitcoin ETFs have maintained their assets is not due to the unwavering conviction of long-term investors, but rather the hedged positions of market makers and arbitrage traders.

After surging past $126,000 in early October last year to reach its peak, Bitcoin recently fell to around $60,000. Despite the drop, the 11 U.S. spot ETFs recorded net outflows of only $8.5 billion. Approximately $85 billion—more than 6% of Bitcoin’s total supply—remains locked in ETFs. While many experts have interpreted this as evidence of strong holding sentiment among investors, Thielen offered a different perspective.

Citing 13F filings submitted by institutions at the end of 2025, Thielen pointed out that between 55% and 75% of the $61 billion in BlackRock’s IBIT ETF shares are owned by hedge funds focused on market making and arbitrage. These players are not betting on price appreciation; instead, they maintain market-neutral strategies by buying spot ETFs while taking short positions in the futures market, generating profits through two-way hedging strategies. In other words, a significant portion of ETF assets represents technical capital seeking to hedge price volatility rather than holdings from genuine Bitcoin bulls.

Market makers provide liquidity to exchange order books, facilitate smooth execution of buy and sell orders, and earn profits through bid-ask spreads. As such, they do not exert directional pressure—either upward or downward—on the market. Thielen added that when Bitcoin was trading around $88,000 in the fourth quarter of last year, market makers reduced their exposure by approximately $1.6 billion to $2.4 billion in response to declining speculative demand and shrinking arbitrage opportunities. Behind the seemingly solid ETF balance figures lies this cold market logic.

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