Bitcoin-focused exchange-traded funds (ETFs) are on track for their worst monthly outflows in nearly two years, adding pressure to an already sluggish cryptocurrency market.
Data shows investors have withdrawn $3.5 billion from U.S.-listed bitcoin ETFs in November, approaching the record $3.6 billion monthly outflow set in February. BlackRock's iShares Bitcoin Trust (IBIT), accounting for about 60% of total assets in such funds, has seen $2.2 billion in redemptions this month—potentially marking its worst monthly performance unless a significant reversal occurs.
Meanwhile, bitcoin itself is experiencing its worst monthly performance since the 2022 crypto market crash, when the collapse of Sam Bankman-Fried's FTX exchange triggered a wave of industry failures. Despite regulatory progress in the U.S. and elsewhere this year, the overall crypto market has contracted sharply in recent weeks.
Nick Ruck, Director at LVRG Research, noted that IBIT's outflows confirm "the early-year market frenzy has completely faded."
Bitcoin briefly fell to $80,553 on Friday before recovering slightly over the weekend. As of Monday morning in New York, it traded at $85,951, still down 8% year-to-date.
Since their January 2024 launch, spot bitcoin ETFs have become a barometer for crypto market sentiment, reshaping capital flows into and out of the asset class. These funds have created a self-reinforcing cycle: inflows accelerate during price rallies, while outflows exacerbate declines.
Citi Research quantified this dynamic, finding that every $1 billion in ETF outflows corresponds to a 3.4% bitcoin price drop, and vice versa. Analyst Alex Saunders noted this helps explain bitcoin's recent pullback, with his year-end "pessimistic scenario" target at $82,000 assuming zero inflows. Current outflows suggest further downside potential.
Rebecca Sin, Senior ETF Analyst at Bloomberg Intelligence, warned: "With markets continuing to decline and volatility rising—especially given gold's trading pattern—we may see more outflows." She noted some redemptions may stem from hedge funds unwinding basis trades (exploiting price gaps between spot and futures markets) or investors using ETFs to profit from volatility or hedge derivatives positions.
Friday also saw record bitcoin ETF trading volume at $11.5 billion, with BlackRock's IBIT alone accounting for $8 billion in trades despite $122 million in outflows.
While such volumes "briefly hinted at demand," Ruck cautioned that IBIT's redemptions reflect "a major shift in institutional preference away from this category's leading product, signaling incomplete market confidence."
BlackRock declined to comment on the outflows.
The trend mirrors broader risk-off sentiment across markets, from AI stocks to meme stocks and high-volatility momentum trades. The S&P 500 is heading for its worst month since March, while bitcoin's short-term correlation with tech stocks recently hit record levels.
Raphael Thuin, Head of Capital Markets Strategy at Tikehau Capital, suggested growing concerns about "potential overvaluation" in tech and AI may be spilling over into speculative sectors like robotics, quantum computing, and digital assets. He added that bitcoin ETF flows now serve as an effective gauge for overall market risk appetite.
"Current market consolidation is driving portfolio rebalancing," Thuin said. "This could heighten sensitivity and potentially lead to losses for some investors."