Crypto Contraction: Spot Bitcoin and Ethereum ETFs Face Billions in Outflows Amid Macroeconomic Pressures

The enthusiasm surrounding US spot Bitcoin ETFs has hit a significant snag, as these investment vehicles are experiencing a sustained and expanding wave of capital withdrawals. According to SoSoValue data, the 12 US spot Bitcoin ETFs collectively registered a staggering net outflow of approximately $1.26 billion last week. This marks the most substantial weekly withdrawal since late January and extends a six-day streak of net outflows, bringing the cumulative total to $1.55 billion.

The peak of this selling pressure manifested last Monday. Following renewed hawkish rhetoric from former US President Donald Trump concerning Iran, Bitcoin’s price briefly dipped below the $77,000 threshold, igniting a broader risk-off sentiment across markets. This triggered the largest single-day withdrawal since January 29, with ETF funds bleeding $648.6 million.

Andri Fauzan Adziima, Head of Research at Bitrue’s research institute, identified three primary catalysts for this capital flight: “The surge in US Treasury yields to a 12-month high, a strengthening US dollar, and escalating geopolitical tensions are the critical factors driving this recent exodus of funds.”

While market anxiety somewhat abated after Monday’s sharp decline, a meaningful return of capital has yet to materialize. Data reveals that the 12 funds continued to see outflows throughout the week: $331 million on Tuesday, $70.5 million on Wednesday, and $101 million and $105 million on Thursday and Friday, respectively.

Ethereum ETFs Also Under Strain

The pressure isn’t confined to Bitcoin. US spot Ethereum ETFs, though experiencing smaller individual outflows, have endured a longer period of sustained withdrawals. Last week, the nine Ethereum funds collectively lost $216 million, marking an unprecedented 10 consecutive trading days of net outflows – the longest continuous bleeding record since early 2024. This persistent decline has reduced the cumulative net inflow for Ethereum spot ETFs to $11.62 billion, with current net assets standing at $11.84 billion. This leaves a precarious buffer of only approximately $223 million, raising concerns that if Ethereum’s price continues to weaken and outflows persist, the overall asset size of some ETFs could fall below the total principal initially invested by their holders.

Investor Impact and ETF Performance Divergence

The impact of these outflows on investor returns is becoming increasingly apparent, particularly for certain ETF issuers. BlackRock’s iShares Bitcoin Trust (IBIT), which remains the world’s largest Bitcoin spot ETF by asset under management, saw its net asset value fall to approximately $61.1 billion by last Friday. This figure is notably lower than its cumulative net inflow of $64.8 billion, indicating that the ETF’s current market value is roughly $3.7 billion less than the total capital investors have poured in.

In contrast, Fidelity Investments’ FBTC has demonstrated relative resilience, with its net assets still exceeding its cumulative net inflow by about $3.2 billion. This suggests that FBTC investors are currently facing less cost pressure compared to those in IBIT.

The Paradox of a “Boring Week” and Underlying Weakness

Intriguingly, this period of intense capital outflow coincided with what appeared to be a remarkably stable “boring week” in the broader crypto market. From Monday’s open to Friday’s close, Bitcoin largely traded within a narrow band around $77,550, while Ethereum held steady near $2,130. The weekly price fluctuation for both assets was less than $1,000. However, just after the ETF market closed on Friday, Ethereum experienced a sharp decline of approximately 3.3%, hinting at deeper, unseen market currents at play.

Indeed, the underlying market structure had already begun to weaken. A report released by Bitfinex on May 14 highlighted a significant cooling in corporate buying, with purchasing volume plummeting by about 80% month-on-month. This left ETFs as virtually the sole remaining and active source of institutional capital in the market. Now, with even ETF funds retreating, the vital support in the spot market is rapidly eroding. Analysis from crypto financial institution Nexo, as of May 19, shows that the “Cumulative Volume Delta (CVD),” a key metric for active buying and selling pressure in Bitcoin’s spot order book, has been negative for nine consecutive trading days—marking the longest continuous net selling record since early 2024.

Macro Perspective and Future Outlook

Despite the significant capital bleed observed last week, a broader macro perspective reveals that US Bitcoin spot ETFs still boast a substantial cumulative net inflow of $57.1 billion, with total net assets reaching $98.9 billion. Notably, IBIT alone holds approximately 4% of Bitcoin’s total circulating supply. While recent outflows signal a period of investor caution and macroeconomic headwinds, the overall picture for these digital asset investment vehicles remains one of considerable scale and adoption.