Funds continued to hemorrhage out of Bitcoin and Ethereum ETFs since November, as there was muted participation and partial disengagement from institutional allocators due to broader market conditions and a year-end risk-averse approach.
The BTC and ETH ETF 30-day moving average crashed into the negative zone and has been in there since November, as investors were moving away from these ETFs. During the past 30 days, the total inflow into BTC ETFs was $2.1 billion, while the outflow was $2.3 billion. As such, the total assets under management have dropped from $127 billion to $122 billion.
Ethereum was no better than Bitcoin in terms of inflows. ETH ETFs attracted $925 million during the past 30 days, while more than $1 billion was pulled out of its ETFs. So why are institutions moving away?
Capital migration within crypto
The investors have better and newer ETFs like XRP and Solana, which are taking over the market. The new ETFs offer lower fees, better structural design, and updated tax-optimization techniques, which gives them a better option.
Risk-averse approach
By late November, the average “cost basis” for investors who entered the spot Bitcoin ETFs was approximately $89,600. However, when Bitcoin’s price dipped below this level in December, a significant portion of the ETF investor base went “into the red.”
When an investment loses value shortly after purchase, it often triggers “stop-loss” selling among retail and newer institutional investors, leading to the outflows as we saw.
Rebalancing portfolio
As it is the end of the year, many investors rebalance their portfolios. After the rally following the 2024 U.S. election, institutional managers are now in “harvest mode.” They are selling to lock in profits for their 2025 annual reports. Others are getting rid of ETFs or realizing minimal losses and reallocating it somewhere else.
Meanwhile, those who bought the “top” in October are selling in December to offset capital gains taxes elsewhere in their portfolios, a standard year-end financial maneuver. This gives them a better view of where they stand and helps them better position themselves for the year ahead.
