Bitcoin ETFs Face $536 Million Outflow Amid Market Turmoil and Rising Tariff Fears

Bitcoin ETFs Face $536 Million Outflow Amid Market Turmoil and Rising Tariff Fears

New York — The U.S. spot Bitcoin exchange-traded funds (ETFs) market witnessed a major setback on Thursday, as investors withdrew $536.4 million in a single day, marking the largest daily outflow since August 1. Analysts suggest the move reflects a growing wave of investor caution amid global economic uncertainty and rising geopolitical tensions.

Massive Withdrawals Reflect Investor Anxiety

Data from SoSoValue revealed that eight of the 12 active Bitcoin ETFs experienced significant outflows. The heaviest losses came from Ark Invest and 21Shares’ ARKB fund, which saw withdrawals totaling approximately $275 million. Fidelity’s FBTC also faced heavy pressure, losing around $132 million. Meanwhile, other major funds — including those managed by BlackRock, Grayscale, Bitwise, VanEck, and Valkyrie — also reported sizable capital flight.

In total, Thursday’s withdrawals represented one of the most significant reversals in institutional interest since early August, signaling that confidence in digital assets may be weakening — at least temporarily.

Ethereum ETFs Also See Red

The sell-off wasn’t limited to Bitcoin. Spot Ethereum ETFs recorded $56.9 million in outflows the same day, erasing gains from the two previous trading sessions. This pattern suggests that investors are broadly pulling back from crypto-related funds in response to wider market pressures.

Analysts Point to Risk Aversion and Global Uncertainty

According to Nick Ruck, Director at LVRG Research, the sharp withdrawal of funds is a direct reflection of increasing investor fear.

“The $536 million outflow highlights a sudden spike in risk aversion,” Ruck said. “This reaction is largely due to macroeconomic stress factors — including the new U.S. tariff policies and a market-wide deleveraging event that has forced liquidations across major crypto assets.”

Over the past week, the cryptocurrency market has endured a period of heightened volatility, following a $20 billion liquidation wave that affected over 1.5 million leveraged traders worldwide. The event led to a cascade of forced sales, pushing prices lower across the entire digital asset sector.

Tariff Shock Adds Fuel to the Fire

The market turbulence intensified after U.S. President Donald Trump announced a 100% tariff on Chinese imports, a move that rippled through global financial markets. The decision spooked investors, sparking fears of a renewed trade war between the world’s two largest economies.

For crypto traders, the news hit particularly hard. Digital assets — known for their sensitivity to geopolitical shifts — reacted sharply, with many investors reducing exposure to riskier holdings. The combination of aggressive trade policies, tightening liquidity, and inflation concerns has created what some analysts describe as a “perfect storm” for volatility.

Market Fragility Raises Short-Term Concerns

Nick Ruck added that the scale of Thursday’s ETF withdrawals signals growing market fragility.

“Outflows of this magnitude typically suggest a near-term decline in confidence. We could see continued pressure on prices if macroeconomic uncertainty persists,” he warned.

This sentiment echoes across the industry. Justin d’Anethan, Head of Research at Arctic Digital, noted that while the market appears eager to find stability, external forces are preventing a sustained recovery.

“The crypto sector is struggling with two unresolved challenges,” d’Anethan explained. “There’s lingering geopolitical uncertainty — particularly around U.S.-China relations — and ongoing restrictive monetary policies from central banks. Until those dynamics shift, volatility will remain a core feature of this market.”

Crypto Prices Slide as Outflows Accelerate

Following the ETF exodus, crypto prices continued to slide. According to The Block’s market data, Bitcoin dropped 2.36% in the past 24 hours to trade near $108,360, while Ethereum fell 2.56% to $3,900. Other altcoins, including Solana and Avalanche, also recorded mid-single-digit losses during the same period.

Market analysts observed that traders have been quick to move capital into safer assets like gold and short-term U.S. Treasuries, both of which have seen rising demand since the tariff announcement.

Deleveraging Pressure Weighs on the Market

The crypto market’s latest pullback is also being linked to an ongoing deleveraging cycle, where traders unwind risky leveraged positions amid falling prices. Such events tend to amplify losses, leading to large-scale sell-offs across exchanges.

“The forced liquidations we saw earlier this week are a symptom of broader market stress,” Ruck noted. “Once leverage is flushed out, we often see temporary stabilization — but that process can be painful for traders caught in the middle.”

This dynamic has left many institutional investors cautious, preferring to wait for clearer signals of stability before re-entering the market.

Despite Turbulence, Some See Opportunity

While the near-term outlook appears shaky, not everyone is pessimistic. Some analysts argue that the broader market fundamentals remain sound, pointing to improving inflation trends and the likelihood of a monetary policy shift in the coming months.

“There’s still reason to remain optimistic,” said d’Anethan. “Inflation pressures are softening globally, and central banks are edging closer to rate cuts. Once we get confirmation through CPI data or official policy statements, confidence could return quickly.”

He added that, historically, large ETF outflows often precede recovery phases, as they flush out weak hands and reset valuations for longer-term investors.

The Bigger Picture: Crypto’s Long-Term Resilience

Despite the current downturn, the adoption of spot Bitcoin and Ethereum ETFs continues to represent a major structural change in the digital asset ecosystem. These funds have opened the door for traditional investors to gain exposure to crypto markets through regulated financial products, deepening liquidity and institutional participation over time.

Since their launch, Bitcoin ETFs have drawn billions in net inflows — even with periodic outflow spikes like this one. Analysts say such volatility is part of the growing pains of integrating digital assets into mainstream portfolios.

“ETFs are a mirror of broader sentiment,” Ruck emphasized. “When investors are nervous, they pull back. But over the long term, the trend toward crypto-based financial instruments remains upward.”

Looking Ahead: Volatility to Stay Elevated

Most experts agree that the coming weeks could bring continued turbulence. Investors are watching key economic indicators — including U.S. inflation reports, Federal Reserve policy meetings, and developments in U.S.-China trade negotiations — for clues about where markets might head next.

Until then, traders can expect heightened volatility and swift market reactions to geopolitical headlines. But for seasoned investors, periods of uncertainty like this often create attractive entry points.

“The crypto market is cyclical,” d’Anethan concluded. “Periods of fear and liquidation often give way to strong rebounds. The key is patience and perspective.”