Spot bitcoin listed in the United States Exchange-traded funds (ETFs) have seen outflows of billions of dollars in recent weeks, amid a 35% price drop from $125,000 to $80,000, sparking rumors of institutional capitulation.
Yet Amberdata’s data analysis presents a much more nuanced picture: concentrated redemptions from “basis trading” or arbitrage bet closes, not widespread panic among ETFs, with total holdings remaining robust at 1.43 million BTC.
“Nearly $4 billion in Bitcoin ETF outflows since mid-October. The price collapsed from $125,000 to $80,000 – a 35% drawdown that erased six months of gains. The prevailing interpretation: institutions had arrived, seen enough, and left,” Michael Marshall, head of research at Amberdata, said in a report.
“The sales, however, were very concentrated on a few issuers and linked to a mechanical unwinding of trade, and not to general investor fear,” Marshall added.
What capitulation?
Capitulation in financial markets occurs when sellers become exhausted after prolonged declines, typically marked by panic selling, high volume, and extreme fear indicators.
In the context of ETFs, a true capitulation would involve widespread selling among issuers and massive redemptions. But that wasn’t the case over the past two months.
Marshall noted that BlackRock dominated 97-99% of the most recent weekly outflows, despite holding only 48-51% of assets under management, while inflows to Fidelity FBTC and other smaller ETFs remained stable.
Meanwhile, over the full 53-day period from October 1 to November 26, Grayscale lost $923 million, or 53.2% of total gross outflows, followed by 21Shares and Grayscale Mini. Together, these three elements accounted for 89.1% of exits. On the other hand, BlackRock and Fidelity recorded capital inflows.
This dual framework underlines this point: no general capitulation, but targeted outcomes. Daily fluctuations in ETF fund flows were highly variable, with a standard deviation of $372 million compared to an average daily flow of $27 million.
Targeted settlements thanks to carry trades
The culprit? Collapse of basis spreads in futures spot arbitrage trading, also known as basis trading, where funds bought ETF shares and sold futures contracts to capture contango yield – without directional guidance, and not with a view of BTC prices.
The 30-day annualized basis, or the spread between futures and spot prices, compressed 217 basis points, from 6.63% to 4.46%, with 93% of the final days below the 5% break-even point, according to Marshall.
This forced carry traders to relax – to sell spot and buy back futures contracts. The decline in open interest in perpetual futures alongside ETF outflows is evidence of this.
According to data tracked by Marshall, BTC perpetual open interest plunged 37.7% ($4.23 billion peak-to-trough), “correlating 0.878 with base movements,” near-synchronous evidence of simultaneous ETF sales and futures short coverings.
And then?
While core traders have been shaken, remaining ETF ownership represents an institutional capital bet on long-term price appreciation. In other words, the market is much cleaner and reset for a bigger rally.
“Once the arbitrage surplus is resolved, the remaining flows increasingly reflect true allocation rather than yield harvesting. The market that emerges is less leveraged, more belief-based and structurally cleaner than the one that entered October,” Marshall said.
