US spot Bitcoin exchange-traded funds (ETFs) saw over $1 billion in net outflows across three trading days, but crypto asset manager Bitwise argues this reflects short-term market sentiment rather than a lasting shift in institutional investment.
The funds recorded $116 million in withdrawals on Tuesday, bringing total outflows since Friday to $1.16 billion, according to SoSoValue data. André Dragosch, head of research at Bitwise, told Cointelegraph that the selling is likely tied to a temporary risk-off environment, not a structural change in institutional interest.
The outflows followed the $6.3 billion hack of Binance on Thursday, which sparked concerns about investor confidence and ETF custody security. Dragosch, however, attributed the withdrawals to broader market weakness rather than fears over the safety of ETF holdings.
Dragosch noted that ETF flows reflect both long-term institutional adoption and shorter-term sentiment shifts. A recent Bitwise survey of 15 institutions found none had reduced their Bitcoin ETF exposure during the bear market. US regulatory filings also showed that most institutional investor categories, except hedge funds, had largely maintained their positions.
Outflows slowed on Tuesday, with $116 million withdrawn compared to $399 million on Monday and $643 million on Friday. The Crypto Fear & Greed Index rose to 34 from 26 on Monday, though it remained in the “Fear” category. Bitcoin gained about 1.6% over the past 24 hours, trading near $78,000 at publication, according to CoinGecko.
The Binance hack has raised questions about ETF custody, particularly because major funds rely on a limited number of custodians. Dragosch highlighted differences between exchange security arrangements and institutional custodians, noting that the Binance incident affected hot wallets, which are internet-connected, unlike cold storage used by institutional custodians like Coinbase.