United States exchange-traded funds have reported massive Bitcoin ETF outflows in recent weeks, coinciding with a severe price correction. However, Michael Marshall, head of research at Amberdata, recently clarified that this phenomenon is not due to widespread institutional panic. Conversely, data suggests that the movements respond to the specific closure of arbitrage trades known as the “basis trade”.
Since mid-October, the market has witnessed withdrawals worth nearly $4 billion dollars while the price fell by 35%. The asset descended from $125,000 to the low $80,000s, erasing months of accumulated gains. Nevertheless, despite the magnitude of the sales, total holdings remain robust at 1.43 million BTC, which rules out a massive flight.
The analysis reveals that selling pressure was highly concentrated among a few issuers and was not a systemic event across the sector. Marshall noted that although BlackRock dominated recent weekly outflows, other large compañÃas (companies) like Fidelity registered capital inflows. Likewise, Grayscale accounted for over 53% of total gross outflows, contradicting the narrative of a total market capitulation.
Do these movements represent a true capitulation by financial institutions?
The root cause of this phenomenon lies in the collapse of spreads in the basis trade between the spot and futures markets. Funds bought ETF shares and sold futures to capture yields, a neutral strategy that does not depend on price direction. Thus, this mechanic forced traders to unwind their positions quickly when profit margins compressed below the profitability threshold.
Specifically, the 30-day annualized basis shrank drastically by 217 basis points, falling from 6.63% to 4.46% in a short time. Given that most recent days traded below the 5% breakeven point, closing positions was inevitable to avoid losses. Therefore, the simultaneous drop in futures open interest confirms that ETF sales were technical hedges and not real fear.
What can we expect for the price following the market cleanse?
With basis traders out of the game, the remaining ETF ownership represents “sticky” institutional capital committed for the long term. Michael Marshall highlights that the emerging market is structurally cleaner, less leveraged, and based on conviction rather than speculation. Thus, current flows now reflect genuine asset allocation rather than simple temporary yield harvesting through arbitrage.
The current landscape suggests that the market has reset and is positioned for much healthier and sustainable potential growth. With excess leverage removed, investor conviction becomes the main driver of price action. Finally, the stability of the remaining funds indicates that institutions continue to bet on Bitcoin’s future appreciation despite recent volatility.
