Bitcoin Funds Head for Worst Month as $3.5 Billion Pulled
TL;DR
Bitcoin ETFs are facing their worst month of outflows since launch, with $3.5 billion withdrawn in November, pressuring the crypto market. This has led to Bitcoin's poor performance and highlights a shift in institutional confidence.
Key Takeaways
- •Bitcoin ETFs are on track for record monthly outflows of $3.5 billion, nearly matching the previous high from February.
- •BlackRock's IBIT fund has seen $2.2 billion in redemptions, contributing to Bitcoin's worst monthly performance since 2022.
- •ETF outflows and inflows act as self-reinforcing feedback loops, with Citi Research noting a 3.4% price drop per $1 billion withdrawn.
- •Record trading volumes of $11.5 billion occurred, but outflows indicate a lack of sustained demand and institutional confidence.
- •Bitcoin's decline correlates with broader market trends, including tech stock slumps, suggesting interconnected financial market stress.
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Exchange-traded funds investing in Bitcoin are heading for their worst month of outflows since launching nearly two years ago, piling yet more pressure on a jaded crypto market.
Investors have pulled $3.5 billion from the US-listed Bitcoin ETFs so far in November, almost equaling the previous monthly record for outflows of $3.6 billion set in February, according to data compiled by Bloomberg. BlackRock Inc.’s Bitcoin fund IBIT, which accounts for about 60% of the cohort’s assets, has registered $2.2 billion in redemptions in November, meaning it will slump to its worst month barring a sharp reversal.
The outflows come with Bitcoin itself set for its worst monthly performance since the crypto industry collapse of 2022, a daisy chain of corporate failures punctuated by the downfall of Sam Bankman-Fried’s FTX. The wider crypto market has contracted sharply in recent weeks, despite registering policy wins in the US and beyond throughout the year.
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The IBIT outflow confirms “that the euphoria from earlier this year has been fully exhausted,” said Nick Ruck, director at LVRG Research.
Bitcoin fell to as low as $80,553 on Friday before regaining some ground over the weekend. It was trading at $85,951 as of 6:12 a.m. in New York on Monday, still down 8% year-to-date.
Spot Bitcoin ETFs have become synonymous with crypto sentiment since their debut in January 2024, reshaping how capital moves into — and out of — the asset class. They have also become self-reinforcing feedback loops: inflows tend to accelerate when prices rise, while outflows amplify declines when prices fall.
Citi Research quantified this phenomenon: For every $1 billion that’s pulled from Bitcoin ETFs, prices see a roughly 3.4% drop. The same is true in reverse. This dynamic helps explain Bitcoin’s recent pullback, according to Citi’s Alex Saunders, who recently set a bear-case target of $82,000 for year-end, assuming zero inflows. Instead, roughly billions have been pulled from the ETF cohort, suggesting scope for further downside.
“We could continue to see more outflows as markets continue to drop and volatility picks up, especially with where gold is trading at the moment,” said Rebecca Sin, senior ETF analyst at Bloomberg Intelligence. She also notes that some of the outflows likely stem from hedge funds unwinding a popular trading strategy called the basis trade, which exploits differences in prices between spot and futures markets. Some have also used the ETFs to profit from the cryptocurrency’s volatility or offset a short position in derivatives.
Friday also saw the Bitcoin ETFs register record trading volumes of $11.5 billion, according to data compiled by Bloomberg. BlackRock’s IBIT alone accounted for $8 billion, and recorded outflows of $122 million.
While those volumes “offered a brief hint of demand,” the IBIT redemptions highlight “a meaningful shift in institutional preference away from the category leader, signaling that confidence has not yet fully returned,” said LVRG’s Ruck.
BlackRock declined to comment on the outflows.
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To be sure, the riskiest trades in finance from AI stocks to meme names and high-octane momentum bets have all been slipping. The S&P 500 for instance is poised for its worst month since March. And the short-term correlation between Bitcoin and tech stocks hit a record earlier this month, according to data compiled by Bloomberg.
To Raphael Thuin, head of capital market strategies at Tikehau Capital, the shifting narrative surrounding technology and artificial intelligence over potential overvaluation may have caused the jitters, affecting more speculative sectors such robotics, quantum computing and digital assets. In environments like these, cash flowing into Bitcoin funds can be a useful gauge of broader market risk sentiment, he added.
“The market is experiencing a phase of consolidation,” Thuin said. “This has contributed to a rotation in investor positioning, which may result in heightened market sensitivity and potential losses for some investors.
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