Bitcoin exchange-traded funds (ETFs) have faced significant outflows, totaling $1.62 billion over a span of four trading days. This sharp decline raises questions about whether hedge funds are reducing their exposure to Bitcoin as market dynamics shift.
The withdrawals coincide with Bitcoin“s struggle to regain traction around critical price levels. A previously favored institutional arbitrage strategy is losing ground, prompting many to reassess their positions. On January 22, 2026, U.S.-listed spot Bitcoin ETFs recorded net daily outflows of $32.11 million. This trend peaked on January 21 with redemptions of $708.71 million, following another significant outflow of $483.38 million on January 20, according to data from Sosovalue.
Even with these outflows, trading activity remained robust on January 22, with Bitcoin spot ETFs achieving a volume of $3.30 billion. However, assets under management fell to $115.99 billion, representing about 6.49% of Bitcoin“s market capitalization.
The iShares Bitcoin Trust, managed by BlackRock, led the daily outflows with $22.35 million redeemed, approximately equivalent to 249.5 BTC. Despite this, the trust continues to dominate the market with $69.84 billion in assets, accounting for nearly 4% of the total Bitcoin supply in ETFs. Fidelity“s FBTC followed closely with $9.76 million in outflows, while Grayscale“s GBTC reported static flows but remains deeply negative overall, exhibiting cumulative net outflows of $25.58 billion as investors pivot away from its higher fee structure.
Other ETF issuers such as Bitwise, Ark, 21Shares, VanEck, Invesco, Valkyrie, Franklin, and WisdomTree showed relatively stable flows, indicating a pause rather than a widespread panic sell-off.
This recent ETF retreat aligns with a downturn in Bitcoin“s price, trading at approximately $89,982 on January 22, reflecting a 1.3% decrease for the day and nearly 5% over the previous week, having briefly dipped to $88,600.
Market observers attribute the ETF outflows largely to hedge fund strategies. Data from Amberdata reveals that yields from the Bitcoin basis trade—a strategy involving the purchase of spot Bitcoin via ETFs while shorting futures—have plummeted to below 5%, down from around 17% a year prior. As these returns diminish, hedge funds find less incentive to maintain their positions in Bitcoin.
Although hedge funds are estimated to constitute only 10% to 20% of ETF holders, their trading activity can significantly impact short-term flows when their strategies falter. Additionally, Bloomberg reports a marked decrease in participation in derivatives markets, with Bitcoin futures open interest on the Chicago Mercantile Exchange (CME) falling below that of Binance for the first time since 2023.
Current one-month annualized basis yields hover near 4.7%, barely above the costs associated with funding and execution, as arbitrage opportunities continue to dwindle. Indicators from CryptoQuant suggest a shift in demand, with significant wallets transitioning from accumulation to distribution, while the Coinbase premium remains notably negative, indicating weaker interest from U.S. institutions.
Despite the overall downturn in Bitcoin, flows in other crypto ETFs suggest a selective repositioning among institutional investors. Ethereum spot ETFs faced significant outflows as well, including $41.98 million on January 22, while products associated with XRP and Solana observed modest inflows.
