Crypto ETPs Bleed $3.2B in 3 Weeks—Is This the Great Unwinding or Just Wall Street’s Tantrum?

Digital asset markets just coughed up a lung. Exchange-traded crypto products hemorrhaged $3.2 billion in three brutal weeks—the kind of exodus that makes hedge fund managers reach for the antacids.

What's driving the dash for cash? Macro tremors? Regulatory jitters? Or just good old-fashioned profit-taking after last quarter's rally?

Meanwhile, traditional finance giants keep playing both sides—launching crypto ETPs with one hand while shorting Bitcoin with the other. Some things never change.

TLDR

• Crypto ETPs saw a sharp reversal in sentiment with $2 billion in outflows last week, the largest since February.
• The United States accounted for 97% of the total outflows, while smaller withdrawals were seen in Switzerland and Hong Kong.
• Bitcoin and Ethereum ETPs experienced the largest withdrawals, with Bitcoin losing $1.38 billion and Ethereum $689 million.
• Some investors shifted to multi-asset and short-bitcoin ETPs, with $69 million flowing into multi-asset funds in the past three weeks.
• The outflows coincide with heightened uncertainty surrounding Federal Reserve policies and a retreat in risk appetite.

Crypto ETPs faced a sharp reversal in sentiment last week, with investors pulling roughly US$2 billion from funds. This marks the largest weekly outflow since February, according to CoinShares’ latest weekly flows report. Over the past three weeks, outflows have totaled around US$3.2 billion, reducing total assets under management (AuM) in crypto ETPs from US$264 billion to US$191 billion.

US Leads $2 Billion Outflow from Crypto ETPs

The United States was the primary source of outflows, accounting for 97% of the total, or US$1.97 billion. Switzerland and Hong Kong also saw smaller outflows of US$39.9 million and US$12.3 million, respectively. German investors bucked the trend, adding US$13.2 million to ETPs, seeing the recent weakness as an opportunity to buy.

CoinShares attributes the outflows to two main factors: uncertainty surrounding monetary policy and heavy selling from large crypto holders, or “whales.” These factors have led to a pullback in risk appetite, prompting investors to exit digital-asset products. “The uncertainty over monetary policy and heavy selling by whales are key contributors to the recent outflows,” said CoinShares in its report.

Bitcoin and ethereum ETPs recorded the most significant outflows. Bitcoin products recorded US$1.38 billion in withdrawals, marking the third consecutive week of net redemptions. This represents around 2% of Bitcoin ETP AuM, highlighting a sustained trend of investor retreat.

Ethereum ETPs were also impacted, with around US$689 million in outflows, roughly 4% of their AuM. Other cryptocurrencies, such as solana and XRP, also experienced losses, though on a smaller scale. Solana ETPs saw US$8.3 million in withdrawals, while XRP experienced US$15.5 million in outflows.

Despite these outflows from major cryptocurrencies, some investors shifted toward safer strategies. Over the past three weeks, around US$69 million flowed into multi-asset ETPs, while US$18.1 million went into short-bitcoin products, as investors sought downside protection.

Macro Uncertainty Drives Market Retreat

The timing of these outflows coincides with growing macroeconomic uncertainty. The Federal Reserve’s more hawkish stance and concerns about policy delays have influenced market sentiment. This backdrop has typically led to a retreat from riskier assets, which explains the pressure on crypto ETPs.

Bitcoin, for example, was trading at around US$95,000 on Monday, a significant decline from its six-figure highs earlier in the autumn. Ethereum also saw a dip, trading between US$3,100 and US$3,200 after experiencing volatile price swings. Analysts noted that the decline in prices reflects a shift in investor sentiment driven by macroeconomic concerns and a retreat in institutional demand.

On-chain data also points to large holders, or whales, driving much of the selling. Reports from on-chain trackers confirm large transfers of crypto to exchanges over the past few weeks. As these whales continue their selling, ETP investors are becoming more cautious, and some are rotating into more diversified or inverse products to manage risk.

The CoinShares report highlights the role of whale selling as a material driver of the outflows from crypto ETPs. This activity is increasing caution among institutional investors, who are now opting for more defensive positions.