In a significant market movement, U.S. spot Bitcoin exchange-traded funds (ETFs) experienced their largest-ever daily net outflows, totaling $937.9 million on February 25. This marked the sixth consecutive trading day of outflows, coinciding with Bitcoin’s price dipping below the $90,000 threshold.
ETF Exodus Amidst Bitcoin Price Decline
The substantial outflows from these ETFs occurred as Bitcoin’s value decreased by 3.4% over the previous day, reaching a 24-hour low of $86,140 from an intraday high exceeding $92,000. Leading the outflows was the Fidelity Wise Origin Bitcoin Fund (FBTC), which saw a record-setting withdrawal of $344.7 million. BlackRock’s iShares Bitcoin Trust (IBIT) followed with an outflow of $164.4 million.
Other notable outflows included $88.3 million from the Bitwise Bitcoin ETF (BITB) and a combined $151.9 million from Grayscale’s Bitcoin Trust (GBTC) and Bitcoin Mini Trust ETF (BTC).
Cumulatively, these 11 Bitcoin funds have experienced over $2.4 billion in net outflows throughout February, with only four days recording net inflows.
Industry Perspectives on the Outflows
Nate Geraci, President of the ETF Store, expressed his astonishment at the traditional financial sector’s aversion to Bitcoin and cryptocurrencies. In a February 26 post on X (formerly Twitter), he remarked, “Still amazed at how much TradFi hates Bitcoin and crypto. Huge victory laps at every downturn. Hate to break it to you, but no matter how big drawdowns are, it’s not going away.”
Analysts such as BitMEX co-founder Arthur Hayes and 10x Research’s head of research, Markus Thielen, suggest that the majority of Bitcoin ETF investors are hedge funds engaging in arbitrage strategies rather than long-term holders.
Hayes predicted on February 24 that Bitcoin’s price could decline to $70,000 due to continued ETF outflows. He explained that many IBIT holders are hedge funds that went long on ETFs while shorting CME futures to earn yields higher than short-term U.S. Treasurys. As these yields diminish alongside Bitcoin’s price, these funds may unwind their positions, impacting the market further.
Thielen’s research indicates that over half of spot Bitcoin ETF investors are involved in arbitrage, selling ETFs while buying Bitcoin futures to maintain a market-neutral stance. This strategy effectively offsets any directional market impact, suggesting that the outflows may not directly correlate with a long-term bearish outlook for Bitcoin.
Summary
- U.S. spot Bitcoin ETFs saw their largest-ever daily net outflows of $937.9 million on February 25.
- This marked six consecutive days of outflows, with Bitcoin’s price dropping below $90,000.The Fidelity Wise Origin Bitcoin Fund (FBTC) led the withdrawals with $344.7 million in outflows.
- Other major funds, including BlackRock’s IBIT and Grayscale’s GBTC, also experienced significant withdrawals.
- Over $2.4 billion in net outflows have been recorded across 11 Bitcoin ETFs in February.
- Analysts believe hedge funds engaging in arbitrage strategies are behind these outflows rather than long-term holders.
- Arthur Hayes predicts Bitcoin could drop to $70,000 due to continued ETF outflows.
- Market sentiment remains cautious, but some experts argue this trend does not indicate a long-term bearish outlook.
