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The Global Money Flow Redirection: US Traders Move From European Bitcoin ETPs to Domestic ETFs

The European Bitcoin ETPs are losing popularity and capitalization following the ETF approval

The landscape of Bitcoin investment is undergoing a significant shift. European Bitcoin Exchange-Traded Products (ETPs) are experiencing a noticeable outflow of funds, coinciding with the launch of spot Bitcoin Exchange-Traded Funds (ETFs) in the United States. This trend, highlighted by CoinShares Research Associate Luke Nolan, suggests a strategic pivot by institutional traders in the U.S. towards the newly approved domestic spot Bitcoin ETFs.

Nolan observes: 

"There has been a significant outflow from European bitcoin ETPs." 

He elaborates that U.S. institutions, previously engaging in nearly risk-free basis trades using European ETPs, are now turning their attention to the U.S. market following the introduction of these new investment products.

Shift in basis trading strategies among U.S. investors

The dynamics of Bitcoin investment strategies are evolving, particularly among U.S. institutional investors. 

CoinShares' Luke Nolan explains the shift: 

"Prior to the approval of multiple spot bitcoin ETFs in the U.S., many institutions utilized European ETPs for nearly risk-free basis trades." 

These trades involved shorting Bitcoin futures while simultaneously buying the underlying asset via European ETPs, a strategy that enabled investors to profit from the basis difference.

Nolan adds:

 "With the recent approval of U.S. spot bitcoin ETFs, it's now more cost-effective and convenient for these institutions to execute the same trades domestically." 

This change not only reflects the growing preference for U.S.-based investment products but also indicates a significant development in the way institutional investors approach Bitcoin trading.

Global impact: European and Canadian Bitcoin ETP outflows

The launch of U.S. spot Bitcoin ETFs has not only affected European Bitcoin ETPs but also Canadian ones. According to data from BitMEX Research, the four largest European bitcoin ETPs have seen substantial outflows since the U.S. ETFs went live. 

BitMEX Research notes: 

"Data is available for Europe, where people are switching away from the higher-fee bitcoin ETPs."

Additionally, a notable surge in outflows from Canadian Bitcoin ETPs has been observed, indicating a broader trend. 

Nolan comments: 

"U.S. investors who had ways to invest in Canadian ETPs are also switching to invest in the new U.S. funds." 

This shift underscores a growing preference for domestic investment options among U.S. investors and reflects the broader impact of the introduction of spot bitcoin ETFs in the American financial market.