On Tuesday, Bitcoin and Ethereum exchange-traded funds (ETFs) in the US markets faced significant net outflows totaling approximately $800 million. As the sell-off deepened in the markets, institutional investors repositioned their portfolios. According to SoSoValue data, spot Bitcoin ETFs alone saw a withdrawal of $577.7 million, marking the highest daily outflow since August 1. Notably, Fidelity’s FBTC fund saw $356.6 million exit, Ark & 21Shares’ ARKB fund faced a $128 million withdrawal, and Grayscale’s GBTC fund recorded $48.9 million in outflows.
Rebalancing Institutional Positions
Bitcoin funds reported negative flows for the fifth consecutive day, reaching a cumulative outflow of $1.9 billion. Ethereum too faced similar pressure, with spot ETH ETFs losing $219.3 million; BlackRock’s ETHA fund suffered the highest loss of $111 million. Grayscale and Fidelity’s funds were not spared either. In contrast, Solana ETFs stood out positively with a modest inflow of $14.8 million.
Rachael Lucas, an analyst at BTC Markets, commented, “The consecutive outflows over five days indicate a significant shift in institutional positioning.” Lucas pointed out that the wave of sales is a tactical move grounded in risk management principles. Last month, comments from U.S. Federal Reserve Chair Jerome Powell dashed expectations for a rate cut in December, propelling the dollar index above 100. Lucas noted, “Risky assets are being repriced; owing to its strong correlation with tech stocks, crypto cannot escape this wave.”
Fear Peaks and Short-term Pressure
On Tuesday, the Fear and Greed Index dropped to 21, placing the market firmly within the “extreme fear” territory. Derek Lim, Director of Research at Caladan, emphasized how Powell’s remarks bolstered the dollar, driving investors to seek refuge by steering away from risky assets. Furthermore, the risk of a U.S. government shutdown has heightened macro uncertainties.
Despite these concerns, Lim argued that the crypto market remains structurally inclined towards bullish tendencies. “While the delay in rate cuts is a short-term negative for risky assets, the broader macro conditions remain unchanged. We are approaching the end of quantitative tightening,” Lim suggested, noting that Bitcoin’s dip from $125,000 to $99,000 is comparatively limited versus the 31% drop in the first quarter of the year. Lucas warned that continued outflows could lead to liquidity constraints and increased volatility.