Spot Bitcoin ETF has fallen for four consecutive days! BlackRock has seen an outflow of 100 million dollars, but retail investors are going crazy buying?

The U.S. Spot Bitcoin ETF saw a net outflow of $40.5 million at the beginning of the week, marking four consecutive days of negative outflow. According to SoSoValue data, the outflow from BlackRock's IBIT reached $100.7 million. The market interprets that when the demand for spot and derivation offsets institutional redemptions, prices can still rise, reflecting changes in market structure rather than a divergence in sentiment between retail investors and institutions.

BlackRock IBIT single-day outflow of 100 million USD leads the decline

(Source: Farside Investors)

In the Spot Bitcoin ETF fund flow data on October 20, the most striking point is that BlackRock's IBIT saw an outflow of $100.7 million in a single day. As the Bitcoin ETF launched by the world's largest asset management company, IBIT has been a major source of inflows since its launch, with its management scale once approaching $100 billion. This rare large-scale outflow has attracted market attention, with many investors concerned that this may indicate a shift in institutional attitudes towards Bitcoin's short-term prospects.

However, the single-day outflow data needs to be understood in a larger context. The scale of BlackRock's IBIT far exceeds that of other spot Bitcoin ETFs. Even though an outflow of 100 million dollars seems large, it only accounts for about 0.1% relative to its nearly 100 billion dollars in assets under management. In proportion, this outflow is not a catastrophic withdrawal of funds, but rather more likely a short-term position adjustment or arbitrage operation by large institutional investors.

The net outflow of 40.5 million dollars on Monday was the result of the outflow of 100.7 million dollars from IBIT, partially offset by inflows into five other ETFs. The ETFs managed by Fidelity, Grayscale, Bitwise, VanEck, and Invesco saw a total inflow of approximately 60.2 million dollars, indicating that the market is not uniformly bearish, but rather that there is a rotation of funds between different ETF products. Some investors may withdraw funds from IBIT and invest in other products based on differences in fees, liquidity considerations, or brand preferences.

The fund rotation between these ETFs is quite common in traditional financial markets. Investors may choose to redeem a particular ETF due to its high premium and instead purchase a similar product that is trading at a discount. Alternatively, certain institutions may have internal regulations limiting the position size of a single ETF, requiring diversification into other products when the scale of BIT becomes too large. Therefore, the outflow from BlackRock cannot be simply interpreted as a bearish signal for Bitcoin.

A cumulative outflow of over 940 million USD for four consecutive days

Looking at the longer time frame, the capital outflow of the Spot Bitcoin ETF shows a persistent characteristic. On Monday, there was an outflow of 40.5 million USD, on Friday 366.6 million USD, and on Thursday 536.4 million USD. Combined with earlier outflows, the total outflow over four consecutive days exceeded 940 million USD. This scale is considered a relatively large-scale continuous outflow event in the history of the Spot Bitcoin ETF.

Four-Day Outflow Timeline:

October 16: Outflow of 536.4 million USD, Bitcoin price is under pressure and declines that day.

October 17: Outflow of $366.6 million, marking the second consecutive day of capital flight.

October 20: Outflow of $40.5 million, outflow rate slows down but the trend remains unchanged.

Cumulative Impact: A total outflow of over $940 million in four days has put significant pressure on market supply and demand.

This kind of persistent outflow is usually related to macroeconomic events or shifts in market sentiment. Looking back at the backdrop of this period, U.S. President Trump announced a 100% tariff on imported products from China, triggering turmoil in global markets and leading to a widespread sell-off of risk assets. In such an environment, institutional investors tend to reduce exposure to high-volatility assets, and the Spot Bitcoin ETF, as a tool that can be quickly liquidated, naturally becomes the preferred choice for reducing positions.

However, the outflow on Monday was significantly smaller than on Thursday and Friday, dropping from over 500 million dollars to over 40 million dollars, indicating that the outflow rate is slowing down. This may mean that the panic selling phase has ended, and the market is looking for a new equilibrium. If the outflow trend can be halted in the following trading days or even turn into inflow, it will mark the restoration of market confidence.

At the same time, the Spot Ethereum ETF recorded a net outflow of $145.7 million on Monday, marking the third consecutive day of negative outflows. This indicates that the capital withdrawal is not only targeting Bitcoin but is also facing redemption pressure across the cryptocurrency ETF sector as a whole. The outflow scale of the Ethereum ETF is more significant relative to its asset management size, suggesting that the selling pressure on Ethereum may be greater.

Market Structure Interpretation of Price Counter-Trend Rebound

The most confusing phenomenon is that despite the continuous outflow of spot Bitcoin ETFs for four days, the price of Bitcoin rebounded to above $111,000 on Monday. This contradiction between institutional withdrawal and price increase has overturned many investors' understanding of the relationship between ETF fund flows and prices. According to The Block's pricing page, as of 3:10 AM Eastern Time on Tuesday, Bitcoin had dropped 3% in the past 24 hours to $107,871, but still showed a significant rebound compared to Friday's low.

Vincent Liu, Chief Information Officer of Kronos Research, provided a professional interpretation to The Block: “Even in the case of ETF fund outflows, when spot and derivation demand offsets institutional redemptions, prices are still rising, especially during periods of changing risk appetite or when ETF fund flows lag behind potential market demand.”

This passage reveals the complexity of the cryptocurrency market. ETF fund flows are just one of many factors that influence prices, rather than the sole determining factor. When retail investors buy heavily on spot exchanges, large long positions emerge in the derivation market, or when demand is strong in the Asian market, these buy orders can completely offset the outflow pressure from ETFs. Especially after the trading hours for US ETFs end, trading activity in the Asian and European markets often dominates price trends.

Liu further stated: “This does not mean that there is a clear divergence in sentiment between institutional investors and retail investors, but rather that changes in market structure, the flow of hedge funds, the rotation of derivations, and reporting delays have blurred the signals between actual demand and ETF data.” This view challenges the simplistic dichotomy of “institutions being bearish and retail investors being bullish.” The reality is more likely that institutions are engaging in complex arbitrage and hedging operations.

For example, an institution may simultaneously perform the following operations: redeem ETF shares (resulting in outflow data), buy Bitcoin on the spot exchange (resulting in buying pressure), and short hedge in the derivatives market (locking in profits). This combination strategy appears as ETF outflows in the data, but in reality, the institution has not reduced its Bitcoin exposure and may even have increased its overall position.

The lagging nature of ETF capital flows and the disconnect from actual demand

Vincent Liu mentioned that the “report lag” is another key to understanding the current market. The funding flow data for Spot Bitcoin ETFs is typically released hours after the trading day ends, while prices change in real time. This means that the outflow data we see on Monday reflects the situation during the U.S. trading hours on Monday, but the price of Bitcoin in the evening of Monday and in the early hours of Tuesday (Asian session) has already incorporated new information and expectations.

More importantly, there is also a structural lag in the ETF capital flow itself. When large institutions decide to adjust their Bitcoin exposure, they do not immediately redeem large amounts of the ETF, but rather execute in batches over a few days or even weeks to avoid causing too much impact on the market. Therefore, the continuous outflow we are seeing now for four days may be a decision made by a large institution a week ago, rather than an immediate reaction to the current market situation.

This lagging nature makes it extremely difficult to predict short-term price movements based solely on ETF fund flows. When there is a large outflow from ETFs, it may be precisely the moment when prices are bottoming out, as these outflows reflect past panic rather than future trends. Savvy investors will consider ETF fund flows as one of many reference indicators, but will not rely solely on it for decision-making.

Analysis of Demand Differences Between Retail Investors and Institutions

Although Liu denied the obvious divergence between institutional and retail investor sentiment, the demand characteristics of the two do show differences from market behavior. Institutional investors are more focused on risk-adjusted returns, portfolio rebalancing, and regulatory compliance. Their trading decisions are often based on quantitative models and risk management frameworks. When macroeconomic uncertainty rises, models may trigger automatic reduction orders, leading to outflows from the ETF.

In contrast, retail investors are more inclined to trade based on price momentum and sentiment. When they see Bitcoin rebounding after dropping from $115,000 to $105,000, the “buying the dip” mentality is triggered, and they rush to buy on spot exchanges. This retail buying may occur on global exchanges rather than through ETF channels, and therefore will not be reflected in ETF fund flow data.

Geographical distribution is also an important factor. US institutions primarily allocate Bitcoin through ETFs, while investors in Asia and Europe tend to prefer holding spot directly. When the US market experiences ETF outflows due to macro concerns, the Asian market may be buying significantly based on different information and expectations. Time zone differences result in these two forces dominating the market at different times, causing a temporary disconnection between ETF data and price trends.