Institutional withdrawals lead to significant shrinkage of Bitcoin and Ethereum ETFs

Bitcoin and Ethereum saw institutional investors reducing their investments due to increased volatility in the US stock market and uncertainty in global monetary policy. Spot ETFs experienced their largest single-day net outflow in nearly two weeks on Monday, with a total outflow of $582.4 million.

According to data, the net outflow from spot Bitcoin ETFs peaked at $357.6 million on Monday, marking the largest single-day redemption since early December. Farside Investors. The sell-off affected Fidelity's FBTC, Ark's ARKB, and Bitwise's BITB, while BlackRock's IBIT remained stable that day.

Spot Ethereum ETFs experienced a similar situation. Outflows on Monday reached nearly $225 million, the highest single-day redemption since the beginning of the month.

Although cryptocurrency prices remained within their recent ranges, this pullback still occurred, further indicating that ETF fund flows (rather than spot price movements) reflect how asset allocators are rebalancing crypto alongside other risk assets.

“Bitcoin is increasingly behaving like a Nasdaq derivative in the fourth quarter: when the tech sector pulls back, Bitcoin falls even more,” said Farzam Ehsani, CEO of crypto trading platform VALR.

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Ehsani stated that this dynamic has led ETF redemptions to track broader stock market de-risking rather than crypto-specific pressures, as institutional investors use spot ETFs as the most effective channel to adjust their exposure when selling US tech stocks.

He pointed out that Bitcoin has been on a steady decline over the past six months, while major US stock indices have remained stable. He also added that November was Bitcoin's “worst-performing month of the year,” while December “currently appears to be a prolonged sideways trend: there have been attempts at growth, but a lack of sustained demand.”

According to CoinGlass data, so far this month, trading activity in US spot Bitcoin ETFs has shown a negative trend, with outflows of about $705 million and inflows of about $480 million. Despite several days of significant inflows during this period, the market's net pullback remains around $225 million. Data tracks capital flows since December.

Meanwhile, spot Ethereum ETFs show that during the same period, inflows and outflows were more balanced, with approximately $411 million in inflows offset by about $403 million in outflows, leaving the sector roughly flat overall.

Risks and Conditions

Ehsani stated: “The Federal Reserve's decision on December 10 has made the risk landscape even more complex.” He noted that while the Fed cut rates, it also hinted that the easing cycle might be paused. “The issue is that inflation is not slowing quickly enough, and there is a lack of unity within the Federal Open Market Committee (FOMC).” He added, pointing out dissent within the Fed.

Ehsani believes that tightening financial conditions and increased pressure on US risk assets have exacerbated this uncertainty.

“Against this backdrop, the yield on 10-year US Treasuries rose to 4.2%, the highest level since early September,” he said, adding that tech stocks were sold off as concerns about overheated AI trading resurfaced.

In this environment, the cryptocurrency market seems to struggle to attract sustained participants, even if prices have avoided a complete collapse.

“Despite market turbulence and increased short-term volatility, the long-term outlook for Bitcoin remains cautiously optimistic,” Ehsani said. “Thanks to the Fed's ‘quasi-quantitative easing’ policy and a loose financial environment, global liquidity is expanding, and the pressure on long-term holders—the main source of selling in 2025—has largely disappeared.”

Looking ahead, Ehsani pointed out, “Due to the maintenance of ETF holdings, the institutional base remains solid,” and these fundamental factors could form “the basis for a gradual recovery in demand and for Bitcoin to break out of the current sideways market.”