In the past two days, the Bitcoin price has tumbled more than 10%, rattling a crypto market that had seen a sustained period of relative stability. The pullback has left investors questioning the role of US spot-based Bitcoin ETFs in the downturn, as data emerges revealing significant outflows from these products.
Vetle Lunde, Head of Research at K33 Research, highlighted on X that ETF outflows have reached notably high levels:“Yesterday’s net outflow of 14,579 BTC in BTC ETPs globally is the largest recorded net outflow since the launch of US spot ETFs. Outflows have dominated throughout February. 69% of all trading days have concluded with net outflows.”
Are Bitcoin ETFs To Blame?
These figures point to a steady drumbeat of selling pressure in the ETF market. The significance, according to Lunde, is not just the single-day spike in outflows but the persistent trend throughout the month of February.
However, not all market observers agree that the large outflows necessarily spell doom. Adam (@abetrade) from Trading Riot argues that dramatic ETF flows have historically preceded market corrections that eventually revert to mean behavior. He pointed out that, except for an exceptional inflow following Trump’s win on November 7th, such “big red numbers” typically trigger panic selling that sets the stage for a subsequent rebound.
Adam’s view is that the current situation might be an overreaction: once the initial wave of selling subsides, the market could stabilize or even see a relief rally. This perspective is built on historical precedents where similar episodes did not lead to sustained downturns, suggesting that the prevailing sentiment could eventually turn contrarian.
“Except for November 7th, when large inflows followed Trump’s win, every other occurrence of outsized inflows or outflows has been a mean-reverting signal. Generally, people see a big red number and start panic selling, or vice versa, which ends up sending the market in the opposite direction,” Adam stated.
Adding further complexity to the picture is the evolving dynamics in the futures markets. Zaheer Ebtikar, Chief Investment Officer and founder of Split Capital, connects the dots between ETF outflows and futures pricing. Until recently, CME Futures were trading at nearly double the premium of conventional cryptocurrency exchanges. However, a recent correction saw the futures premium dip below 5%—a level approaching the risk-free rate.
Ebtikar noted that this correction has been pivotal. As the futures premium normalized, market participants appeared to “throw in the towel” on Bitcoin ETFs, with CME Futures open interest falling to its lowest since the last election cycle. This decline in open interest, accompanied by near-record trading volumes on the CME, points to a shift in sentiment where investors are increasingly cautious about holding ETFs while still engaging in futures speculation.
The interplay between a shrinking futures premium and rising futures volume creates a paradox. “In a paradoxical way, futures premium down = futures start getting bid and ETFs start dumping. The final tell here was CME Futures volume in the past couple of days reaching near record highs since the election,” Ebtikar concluded.
Macro Headwinds
Macroeconomic unease is also dragging on crypto and traditional markets alike. Singapore-based QCP Capital describes the situation as a “global risk-off move” affecting equities, gold, and BTC, amid growing whispers of stagflation. Consumer sentiment has taken a hit, suggested by a weaker-than-expected Consumer Confidence Index of 98 (versus 103 expected), while the US administration’s newly confirmed 25% tariffs on Canadian and Mexican imports—effective March 3—have further dampened sentiment.
As QCP Capital sees it, investors are growing wary of potential trade escalations and elevated inflation, which together create an atmosphere of uncertainty. The once-crowded “Magnificent 7” equity trade is unraveling, and “long crypto” has also been identified as one of the most overextended positions. In choppy markets, crypto is often the first to be liquidated, reinforcing the negative price action.
Looking ahead, QCP Capital points to a pair of key events that could set the tone. The NVIDIA earnings and this week’s PCE print. Results from the chipmaker, which has ridden the wave of AI-driven demand, could trigger another leg down if guidance disappoints. The upcoming Personal Consumption Expenditures (PCE) data is forecast at 2.5% year-over-year, still above the Federal Reserve’s 2% target. Until inflation convincingly trends lower, the Fed is likely to keep rates steady. Markets currently price two rate cuts in 2025, the first in June or July.
QCP Capital warns that markets remain fragile, advising caution as consumer and retail sentiment surveys—often leading indicators—could provide early signals of a stagflationary trajectory.
At press time, BTC traded at $87,818.
Featured image created with DALL.E, chart from TradingView.com
