Spot Bitcoin ETFs bled $410.4 million on Thursday, extending a volatile stretch of outflows as institutional investors reposition against a murky macro backdrop.
The erratic flow pattern suggests that institutional conviction is wavering, analysts told Decrypt, with retail traders left to navigate a market that appears directionless despite significant daily volume.
"On one side, Kevin's Fed nomination has lowered near-term rate cut expectations, sparking rapid repricing in equities, bonds, and crypto," Christophe Diserens, chief wealth officer at SwissBorg, told Decrypt. "Meanwhile, the Fear and Greed index hit extreme fear levels unseen since 2023, with negative momentum fueled by ongoing bear market narratives on social media."
A structural tug-of-warThis tension between “short-term panic and long-term optimism” is driving the volatility in daily ETF flows, according to the SwiffBorg analyst.
The wild swings are not random—they reflect a structural tug-of-war beneath the surface, Nick Motz, CEO of ORQO Group and CIO of Soil, told Decrypt. "You've got institutions that got in late 2025 now taking profits, and on the other side, there's a messy short-covering cycle playing out in real time,” he said.
Motz explained that as Bitcoin hovers around the $75,000 range—roughly where mining production costs sit—institutional algos are kicking off automated liquidations tied to hawkish Federal Reserve expectations. The result is large outflows from certain ETFs, but the analyst noted that much of that capital isn't leaving crypto entirely.
Instead, he argued, "it's shifting into more compliant derivatives channels like the CME." That results in, "a choppy, directionless tape that honestly looks broken to most retail traders.” Motz referred to the situation as a “liquidity mirage,” in which, “there's activity everywhere but no real direction, and it's messing with sentiment badly."
Volatility set to continueMotz expects the volatility to persist through at least the first half of 2026, especially with the recent drop burning out 2025's euphoria. “But the structural reflation trade everyone's waiting on probably doesn't kick in until the second half of 2026," he said.
The "reflation trade" refers to a widespread, consensus-driven investment strategy that bets on a sustained period of economic growth and rising prices, driven by policy shifts rather than just temporary recovery.
However, the macro backdrop offers little relief at the current stage, the Soil analyst added, explaining that the global M2 money supply growth has flatlined, and high-yield credit spreads are starting to creep wider, which is a textbook liquidity drain for risk assets like Bitcoin.
Instead, Motz warned to watch out for “head-fake rallies,” which are “sharp moves up that look convincing but are really just trapping late buyers before the next leg down.”
"The market probably doesn't find a real floor until credit markets finish repricing risk, which honestly could take us into summer,” he said. “So if you're expecting resolution anytime soon... I wouldn't hold my breath. Choppy, volatile, sideways action is the base case for a while."
