Bitcoin ETFs Just Had Their Worst Day Ever

Spot Bitcoin exchange-traded funds hit a daily record high with over $1.1 billion in combined outflows Tuesday as the price of the largest cryptocurrency by market value plummeted in a wider market rout.

The drop followed outflows on Monday of $539 million–now the sixth-highest total in the funds’ nearly 14-month history–according to UK asset manager, Farside Investors.

"We had a record outflow yesterday across the U.S. spot Bitcoin ETFs," Bloomberg ETF Research Analyst James Seyffart wrote in an email to Decrypt. "But to be honest, this is largely par for the course of a volatile ETF category. In general, the way ETFs grow is a sort of two (or three) steps forward and one step back."

But Seyffart noted that these ETFs still managed more than $100 billion in assets. "So the outflow numbers seem huge when you're talking billions, but when you quantify this as ~2.3% of assets, it's not that crazy. Though we don't know when this will end."

Seyffart added: "There's probably a lot of things contributing to this, including the Bybit hack and crypto/Bitcoin-specific things. There's also a broader selloff in risk assets in general due to potential macro slowdown, but I'd wager that an unwinding of the basis trade is a key factor for ETF outflows. These ETFs are often used as the long end of a basis trade to offset short positions in Futures."

The 11 Bitcoin ETFs have shed more than $2 billion in assets across February, as investors fretful about inflation, a potential trade war stemming from Trump administration tariffs, and global conflicts have veered away from crypto and other risk-on investments. The $1.4 billion hack of the Bybit exchange on Friday further unsettled markets. 

Spot Bitcoin funds have generated about $40 billion in net inflows to rank among the fastest-growing ETFs in the industry’s three-decade-old history. 

In a text to Decrypt, ETF.com Analyst Sumit Roy noted that the tech-focused Invesco QQQ Trust (QQQ), which manages more than $328 billion in assets, had declined four consecutive days. The Nasdaq and S&P 500 indexes have fallen 3.8% and 2.1%, respectively, over the past five days.

Yet Roy noted that “on the plus side, despite the recent turmoil, flows for U.S.-listed crypto ETFs remain in positive territory” this year, at $3.1 billion.

Bitcoin fell below $84,000 on Wednesday for the first time since November, currently showing a 12% weekly drop at a price of $84,032. Ethereum—the second-largest digital asset by market capitalization—and other high-cap coins like XRP and Solana have plunged by double digits over the past seven days. 

ETFs based on the spot price of Ethereum have shed roughly $130 million this week—their highest two-day total since early January.

The fall-off has come even as multiple asset managers have filed applications with the U.S. Securities and Exchange Commission for new funds based on the performance of XRP, Litecoin, Cardano, Polkadot, and Solana, to meet investors’ growing appetite for crypto-focused funds. 

In an email Wednesday, Geoffrey Kendrick, global head of digital assets research at U.K.-based bank Standard Chartered, remained cautious about crypto markets, retreating somewhat from a comment earlier this week that investors might buy a dip when daily ETF outflows reached $1.1 billion. 

“While that level of outflows was encouraging, I don’t think the selloff is over,” wrote Kendrick, who had forecast that Bitcoin would sink to the low $80,000 range. It's well on its way there, as of this afternoon.

Edited by Andrew Hayward