Spot bitcoin listed in the US Exchange-traded funds (ETFs) have seen billions of dollars in outflows in recent weeks amid a 35% price drop from $125,000 to lows of $80,000, sparking talk of institutional capitulation.
However, data analysis by Amberdata paints a much more nuanced picture: concentrated redemptions from “base trading” or arbitrage bet closures, not widespread panic among ETFs, with total holdings remaining strong at 1.43 million BTC.
“Nearly $4 billion in outflows from Bitcoin ETFs since mid-October. The price plummeted from $125,000 to $80,000, a 35% drop that erased six months of gains. The prevailing interpretation: institutions had arrived, seen enough, and were leaving,” Michael Marshall, Amberdata’s head of research said in a report.
“The selling, however, was highly concentrated among a few issuers and tied to a mechanical trading situation, not widespread 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 broad selling among issuers and massive redemptions. But that wasn’t the case for the past two months.
Marshall noted that BlackRock dominated 97% to 99% of the most recent weekly outflows despite holding only 48% to 51% of assets under management, while Fidelity FBTC saw inflows and other smaller ETFs were flat.
Meanwhile, over the entire 53-day period from October 1 to November 26, Grayscale lost $923 million, representing 53.2% of total gross outflows, followed by 21Shares and Grayscale Mini. Together, these three accounted for 89.1% of departures. In contrast, BlackRock and Fidelity recorded inflows.
This double framing underscores the point: there is no blanket capitulation, but selective relaxation. 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 reversals driven by carry trades
The culprit? Collapse of basis spreads in spot futures arbitrage trading, also known as basis trading, where funds bought ETF shares and sold futures to capture contango performance (neutral direction, not a view on BTC price).
The 30-day annualized basis, or the spread between futures and spot prices, narrowed 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 this.
According to data tracked by Marshall, BTC perpetual open interest plummeted 37.7% ($4.23 billion peak-to-trough), “correlating 0.878 with base movements,” nearly unified evidence of simultaneous ETF sales and futures short coverings.
What’s next?
With base traders eliminated, the remaining ETF ownership represents rigid institutional capital betting on long-term price appreciation. In other words, the market is much cleaner and readjusted for a bigger rally.
“With excess arbitrage resolved, remaining flows increasingly reflect genuine allocation rather than yield harvesting. The emerging market is less leveraged, more conviction-driven and structurally cleaner than the one that entered October,” Marshall said.
