Bitcoin ETFs Shed $649M in a Day as Long-Term BTC Holders ‘Limit Downside Potential’

Spot Bitcoin ETFs are taking a beating, shedding another $648.64 million on Monday following last week’s $1 billion outflows, according to SoSoValue.

BlackRock’s IBIT led Monday’s outflows with $448 million. It was followed by ARK Invest and 21Shares’ $110 million and Fidelity’s $63 million outflows.

Bitcoin dropped 6.7% from $81,700 last Thursday to a weekly low of $76,201, according to CoinGecko data. It is down 0.7% over the past 24 hours and is currently trading at around $76,680.

Agne Linge, Advisor to the Board at blockchain financial infrastructure firm Wefi, told Decrypt that the outflows are “correlated to the general market and reflect the de-risking strategy that was conducted by fund managers in light of geopolitical events,” amid the recent escalation in the U.S.-Iran conflict.

While Linge alluded to the impact of the geopolitical situation, Illia Otychenko, lead analyst at CEX.IO, suggested the outflows were “driven by last week’s U.S. inflation data, which significantly shifted market expectations around Federal Reserve policy, with rising expectations of a rate hike this year.”

On Myriad, a prediction market owned by Decrypt’s parent company Dastan, users place just a 2% chance on the Fed decreasing rates by 25 bps in June, and a 4% chance of them cutting rates by more than 25 bps before July.

Otychenko also noted that the broader de-risking sentiment was also driven by “rising concerns that the U.S.-Iran conflict could escalate again, with Donald Trump’s ‘calm before the storm’ post.”

Reflecting last week’s 6.7% drop in Bitcoin and the weekly ETF outflows, investor sentiment on the Crypto Fear and Greed Index has dropped to 25, indicating “Extreme Fear.”

Looking ahead

Despite the bearish sentiment, several structural factors could cushion further downside.

Vetle Lund, K33 Research’s head of research, previously noted that Strategy’s perpetual preferred stock Stretch, STRC, could be fueling recurring mid-month rallies for Bitcoin.

While Strategy’s demand may help offset ETF outflows partly or in full, it does not appear to be a sufficient factor on its own to sustain Bitcoin’s price recovery, Otychenko said, citing similar instances in late January and early February when Strategy’s demand exceeded ETF outflows, without significantly impacting Bitcoin’s price.

Though Bitcoin’s aggregated open interest declined from $29 billion to $26 billion over the past two weeks, according to CryptoQuant data, the metric remains elevated by recent historical standards, suggesting sustained investor speculation despite the price drop.

Bitcoin’s funding rates metric has flipped positive after a multi-month negative streak, suggesting investors are opening long positions despite the recent drop that flushed over $670 million in liquidations last week.

The more important factor is long-term holder behavior, Otychenko said, suggesting that these cohorts “have continued accumulating BTC consistently for months at a much bigger scale than MSTR, even as a growing portion of their supply moved into unrealized loss.”

That is “limiting Bitcoin’s downside potential,” he said, suggesting that this was “a sign of long-term conviction” despite short-term volatility. The thesis is supported by Myriad users, who remain optimistic that Bitcoin’s next move will take it to $84,000, placing a 77% chance on that outcome. Nevertheless, recent events have tempered their enthusiasm somewhat, with that figure dropping from highs of 89% last week.