US Spot Bitcoin ETFs Face $3.5B in Net Outflows This February

U.S. spot Bitcoin exchange-traded funds (ETFs) faced their most challenging month yet, recording over $3.5 billion in net outflows in February—the highest since their launch. The data, sourced from SoSoValue, indicates a significant shift in investor sentiment, marking a stark contrast to the $4.8 billion in inflows observed in January.

A Month of Two Halves: From Inflows to Heavy Outflows

The month started on a positive note, with $203.54 million in net inflows during the first week, continuing a five-week streak of capital influx. However, market conditions shifted rapidly, leading to consistent outflows in the following weeks.

• Weeks 2 & 3: Outflows exceeded $500 million per week as investors pulled back.
• Week 4 (Feb 24–28): The situation worsened, with a record $2.61 billion in net outflows, making it the worst-performing week for Bitcoin ETFs to date.
• Feb 25: The biggest single-day outflow of $1.14 billion was recorded.

Despite the heavy selling pressure, February 28 saw a return to net inflows, with $94.34 million entering the funds. Notably, ARK 21Shares’ ARKB led the way with $193.7 million in inflows, followed by Fidelity’s FBTC, which attracted $176.03 million. However, these gains were partially offset by $244.56 million in outflows from BlackRock’s IBIT.

Market Volatility and External Factors Fuel Outflows

Bitcoin’s sharp price correction was a major catalyst behind these ETF outflows. Over February, BTC plummeted 28% from its record high, making it the worst monthly drop since June 2022. This wiped out nearly $1 trillion from the overall crypto market capitalization.

Several external factors contributed to this downturn:

1. Macroeconomic Uncertainty: Investor confidence wavered as former President Donald Trump’s aggressive trade policies sparked fears of economic instability.
2. Inflationary Pressure: Rising inflation further strained financial markets, leading to capital shifts away from riskier assets like Bitcoin.
3. Historic Crypto Theft: A $1.4 billion hack of Bybit, the largest crypto exchange theft in history, sent shockwaves through the industry, reinforcing market fears.
4. Speculative Memecoin Losses: Many traders faced significant losses due to the collapse of high-risk speculative assets, further dampening market sentiment.

Fidelity’s FBTC Takes the Hardest Hit

Among the 12 Bitcoin ETFs, Fidelity’s FBTC led the exodus, losing over $1.4 billion in February. The fund had initially been a strong contender in the spot Bitcoin ETF space, benefiting from institutional interest, but the sudden shift in market conditions resulted in massive capital outflows.

Crypto Market Recovery Following Trump’s Crypto Reserve Announcement

Despite the February downturn, a major turnaround took place in early March. After Bitcoin hit a three-month low, dipping below $80K, the market rebounded following an announcement from Donald Trump.

Trump revealed plans to establish a U.S. Strategic Crypto Reserve, which would include a basket of cryptocurrencies like Bitcoin and Ethereum. This news instantly boosted investor confidence, leading to an 8.1% surge in BTC, pushing its price to $92,980.

Ethereum (ETH), which had also been struggling, posted a 9.5% gain, reflecting renewed optimism across the market.

Institutional Perspective: A Pivotal Moment for Crypto

Commenting on the potential impact of the reserve, the head of U.S. business at 21Shares, Federico Brokate, said:

“The launch of a U.S. Crypto Strategic Reserve marks a pivotal moment for digital assets, reflecting a major step in the government’s engagement with the crypto industry.”

Brokate further emphasized that including multiple blockchain protocols highlights the diverse utility of blockchain networks, from tokenization to global payments. According to him, this move positions the U.S. at the forefront of the next phase of crypto adoption and innovation.

Conclusion: A Market Poised for a Comeback?

While February was a rough month for Bitcoin ETFs, the early signs of recovery in March suggest that the worst may be over. With institutional investors closely watching the U.S. Crypto Strategic Reserve’s impact, Bitcoin and the broader market could be on the verge of another bull run.