The US-listed spot bitcoin exchange-traded funds (ETFs) saw billions in outflows in recent weeks amid a 35% price drop from $125,000 to the low $80,000s, sparking talk of institutional capitulation.
Still, data analysis from Amberdata presents a far more nuanced picture: concentrated redemptions from “basis trading” or arbitrage bet closings, not broad panic across ETFs, with total holdings remaining robust at 1.43 million BTC.
“Nearly $4 billion in Bitcoin ETF outflows since mid-October. Price collapsed from $125,000 to the low $80,000s — a 35% move 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.
“However, the selling was highly concentrated among a few issuers and tied to a mechanical basis trading, not broad investor fear,” Marshall added.
What capitulation?
Capitulation in the financial markets occurs when sellers exhaust themselves after prolonged declines, typically marked by panic selling, high volume and extreme fear indicators.
In the ETF context, true capitulation would involve broad selling across issuers and massive redemptions. But that was not the case in the last two months.
Marshall noted that BlackRock dominated 97%-99% of recent weekly outflows despite only having 48-51% of assets under management, while Fidelity FBTC recorded inflows and other smaller ETFs held steady.
Meanwhile, during the full 53-day window from October 1 to November 26, Grayscale soaked up $923 million, which is 53.2% of the total gross outflows, followed by 21Shares and Grayscale Mini. Together, these three accounted for 89.1% of the outflow. In contrast, BlackRock and Fidelity recorded inflows.
This double framing emphasizes the point: no widespread capitulation, but targeted decommissioning. 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 driven by carry trades
The culprit? Collapsing basis spreads in the spot-futures arbitrage trade, also known as the basis trade, where funds bought ETF shares and sold futures to capture the contango yield – directional neutral, not a BTC price view.
The annual 30-day basis, or the spread between futures and spot prices, compressed 217 basis points from 6.63% to 4.46%, with 93% of recent days below the 5% breakeven threshold, according to Marshall.
This forced carry traders to relax – sell spot and buy back futures. The decline in perpetual futures open interest along with ETF outflows is proof of that.
Per data tracked by Marshall, BTC’s perpetual open interest fell 37.7% ($4.23 billion peak-to-trough), “correlating 0.878 with basis moves,” near-locked steps evidence of simultaneous ETF selling and futures short covers.
So what?
With basis traders shaken out, the remaining ETF ownership represents sticky institutional capital bets on long-term price appreciation. In other words, the market is much cleaner and reset for a major rally.
“With the arbitrage overhang cleared, the remaining flows increasingly reflect true allocation rather than dividend harvesting. The market that emerges is less leveraged, more conviction-driven and structurally cleaner than what entered October,” Marshall said.
