Investors Pulling Back on ETFs Fueled the Bitcoin Rout

The market correction in bitcoin this month has been fueled by a retreat from exchange-traded fund (ETF) investors, who have pulled billions of dollars from their funds as the asset’s price has fallen. The pullback suggests that investors are now treating crypto ETFs less like a meme and more like any other long-term investment vehicle.

Roughly $4 billion has been withdrawn from digital asset ETFs so far this month—a record amount. BlackRock’s IBIT ETF, the most popular U.S. bitcoin ETF, saw a single-day outflow of more than half a billion dollars.

According to The Block, JPMorgan analysts noted that the continuation of the crypto market correction in November appears to have been driven primarily by non-crypto investors—mostly retail participants—who tend to use spot bitcoin and Ethereum ETFs as their entry point into the market.

Going Underwater

After peaking above $125,000 in October, bitcoin’s recent decline has pushed it below JPMorgan’s support level of $94,000. Short-term holders—defined as those holding the asset for fewer than 155 days—are almost entirely underwater on their recent purchases, according to CoinDesk.

Investors new to digital assets tend to trade them much like equities, showing little patience for price dips.

As bitcoin has fallen, retail investors have nonetheless poured nearly $100 billion into equity ETFs in November. Analysis from JPMorgan notes that this group has behaved similarly in the past, selling off crypto assets while heavily buying stocks in February and March.

Knocking on the Door

Still, the recent outflows are only a fraction of the total capital allocated to crypto funds. Net inflows still stand at nearly $60 billion.

The crypto fund industry is less than two years old, since the SEC approved 11 bitcoin-based funds in January 2024, followed a few months later by the authorization of five ether-based funds.

Many more funds are hoping to gain access to this market. As of last month, 92 additional crypto funds remained in the approval pipeline, many of them tied to lesser-known assets like Avalanche and Bonk. The SEC has already approved Grayscale’s multi-asset crypto exchange-traded product, Digital Large Cap Fund (GDLC)—the crypto world’s first equivalent of a mutual fund.