Recent outflows from Bitcoin exchange-traded funds (ETFs) have surpassed historical levels, reflecting a temporary tactical rebalancing strategy rather than a retreat from the market by institutional investors, as suggested by analysts from crypto exchange Bitfinex.

According to Bitfinex, the recent shifts are primarily attributed to long-term Bitcoin holders cashing in on profits and leveraged positions being liquidated. These activities have contributed significantly to the reported billions in ETF outflows, alongside a broader market correction.

The uncertainty surrounding a potential interest rate cut in December has prompted a cautious approach among investors, further complicating the situation.

“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 has maintained that the fundamental outlook for Bitcoin remains robust, viewing the ongoing price adjustments as part of a transient market trend. They affirm that Bitcoin continues to prove its worth as a store-of-value asset poised for sustained institutional acceptance.

November ETF Outflows

The exit from Bitcoin ETFs reached $3.7 billion in November, influenced by losses from October’s market crash, which has stoked fears of an impending bear market.

Crypto market trends. Source: TradingView

Among the ETFs, BlackRock’s iShares Bitcoin Trust (IBIT) has led these outflows, recording over $2.47 billion in redemptions throughout November alone. The ETF sector has observed some of the largest single-day outflows on record, with one day exceeding $900 million, per reports from Farside Investors.

Currently, the average Bitcoin ETF investor finds themselves at a loss due to BTC dipping below $90,000, though market analysts suggest this group will likely hold on during these fluctuations. Vincent Liu, Chief Investment Officer at Kronos Research, stated that typical Bitcoin ETF investors maintain a long-term focus, often disregarding short-term market volatility.

Moreover, Eric Balchunas, a senior analyst from Bloomberg focusing on ETFs, noted that many of the recent sales can be attributed to long-time Bitcoin holders who prefer direct ownership of the cryptocurrency rather than through these investment vehicles.

Bitcoin price decline below $90,000. Source: TradingView