BTC ETF outflows are 'tactical rebalancing,' not institutional flight: Analysts

The outflows reflect short-term price movements, not lower institutional demand or structural issues in the Bitcoin market, analysts said.

The record outflows from Bitcoin exchange-traded funds (ETFs) represent short-term, “tactical” rebalancing rather than institutional flight from BTC, according to analysts at crypto exchange Bitfinex.

Long-term Bitcoin (BTC) holders taking profit and selling their coins, and highly-leveraged positions flushing out of the markets, are the root causes of the billions of dollars in ETF outflows and the broader market crash, Bitfinex analysts said.

The uncertainty of a December interest rate cut has also shifted investors to a risk-off outlook, Bitfinex said.

“This does not derail the longer-term move towards institutionalization. The spot ETF channel remains intact, and the outflow likely reflects tactical rebalancing rather than a wholesale exit from the asset class.”

Bitcoin ETF flows for November. Source: Farside Investors

Bitfinex said the structural thesis for Bitcoin remains “firm,” and that Bitcoin is positioned for continued institutional adoption as a store-of-value asset with strong long-term fundamentals. The ongoing drawdown is a short-term price movement, they added.

Related: BlackRock leads near $3B Bitcoin November ETF exodus with record $523M outflows

Bitcoin ETFs bleed billions of dollars and post record outflows as market panic deepens

Bitcoin ETF outflows have topped $3.7 billion in November, as losses from Octobers crypto market crash extended into the month, sparking investor fears of the beginning of a bear market.

The majority of the crypto market continues to bleed well into the month of November. Source: TradingView

BlackRocks iShares Bitcoin Trust (IBIT) ETF led the outflows, with over $2.47 billion in redemptions so far in November.

The Bitcoin ETFs posted some of the worst daily outflows on record in November. Single-day outflows crossed $900 million on Thursday, according to Farside Investors.

The average ETF investor is now underwater following BTCs crash below $90,000. However, this does not mean that ETF investors will panic sell, Vincent Liu, chief investment officer at quantitative trading company Kronos Research, told Cointelegraph.

The price of Bitcoin plunges below the $90,000 level. Source: TradingView

Bitcoin ETF investors tend to be long-term holders and ignore short-term market noise and price movements, Liu said.

Long-term Bitcoin whales and OGs who hold the asset directly rather than through an investment vehicle are responsible for most of the selling, according to senior Bloomberg ETF analyst Eric Balchunas.