The U.S. spot Bitcoin ETFs just experienced their worst single-day net outflows, shedding a staggering $937.9 million on Feb. 25, marking the sixth consecutive trading day of capital flight. The mass exodus came as Bitcoin slipped 3.4% in 24 hours and dropped to a low of $86,140 from an intraday high of over $92,000.
Institutional Exit Sparks Concerns
Leading the outflows was Fidelity’s Wise Origin Bitcoin Fund (FBTC), which lost a record $344.7 million in a single day. BlackRock’s iShares Bitcoin Trust (IBIT) followed closely with a $164.4 million decline. Other major funds also saw substantial redemptions, including Bitwise Bitcoin ETF (BITB) with $88.3 million in outflows, and Grayscale’s funds, which collectively lost $151.9 million between its flagship Grayscale Bitcoin Trust (GBTC) and the newer Bitcoin Mini Trust ETF (BTC).
Since the start of February, the 11 U.S. Bitcoin ETFs have witnessed a net outflow of approximately $2.4 billion, with only four days registering net inflows. The market downturn has left industry participants questioning whether traditional finance (TradFi) investors truly believe in Bitcoin’s long-term value.
Hedge Funds Driving ETFs Volatility
Nate Geraci, president of ETF Store, voiced his frustration over the negative sentiment surrounding Bitcoin within traditional financial circles. In a Feb. 26 X post, he remarked, “Still amazed at how much TradFi hates Bitcoin and crypto. Huge victory laps at every downturn. Hate to break it to you, but no matter how big drawdowns are, it’s not going away.”
Crypto industry figures, including BitMEX co-founder Arthur Hayes and 10x Research’s Markus Thielen, have suggested that a significant portion of Bitcoin ETF investors are hedge funds engaged in short-term arbitrage rather than long-term Bitcoin believers. Hayes projected that Bitcoin could drop as low as $70,000 due to ongoing ETF sell-offs.
He explained that many hedge funds adopted a “long ETF, short CME futures” strategy to capture a risk-free yield exceeding that of short-term U.S. Treasurys. However, as Bitcoin’s price declined, this yield shrank, forcing funds to unwind their positions by selling ETFs and repurchasing CME futures, exacerbating market volatility.
Thielen’s recent research showed that over half of Bitcoin ETF investors are engaged in arbitrage rather than directional bets on BTC.
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