Capital Rotation Toward AI Weighs On Bitcoin ETF Flows

The institutional investment barometer remains in the red. At a time when bitcoin is trying to stabilize after many weeks of turbulence, US spot Bitcoin ETFs face a new wave of large-scale withdrawals. Since early June, these investment vehicles have lost more than 2.1 billion dollars, a sign that raises questions about investors’ appetite for the world’s leading crypto.

Bitcoin ETFs experience a new wave of withdrawals

The US-listed spot Bitcoin ETFs are going through one of the toughest phases since their inception. These products have indeed seen more than 2.1 billion dollars of net outflows since early June. The session on June 11 resulted in an additional withdrawal of 214 million dollars.

This trend follows that observed in May, when 2.4 billion dollars were already withdrawn from Bitcoin ETFs. In the preceding days, the market experienced a series of thirteen consecutive sessions of outflows leading to nearly 4.4 billion dollars withdrawn before a brief return of positive flows on June 4.

The key figures to remember are the following :

• 2.1 billion dollars of net outflows since early June ;
• 214 million dollars withdrawn during the session on June 11 ;
• 4.4 billion dollars of outflows recorded during a series of thirteen consecutive sessions ;
• 33 billion dollars of assets erased from US spot Bitcoin ETFs since May 10 ;
• A 27% drop in bitcoin from its peak at 81,443 dollars to its low point at 59,353 dollars.

The contraction of assets under management is equally spectacular. Net assets of US spot Bitcoin ETFs fell from 109 billion dollars on May 10 to 77 billion dollars today. This 33 billion dollar drop happened alongside the correction in bitcoin.

Pressure remains strong, but according to Adam Haeems, Chief Investment Officer at Tesseract Group, the intensity of the selling dynamics seems to weaken. He states that “the selling pressure has not really stabilized yet, but it appears to be ebbing more than intensifying”. This analysis suggests that the outflow movement could gradually wane.

Capital rotation reshapes investors’ priorities

The withdrawals observed for several weeks are explained by Adam Haeems mainly through specific market mechanisms. The unwinding of arbitrage setups between spot and futures ETFs and a “flight” of capital out of the most expensive US spot Bitcoin fund are cited as explanations. This product has lost about 27 billion dollars since its launch, meaning investors are looking to reduce certain exposure costs.

The expert also highlights a more structural evolution in investors’ preferences. Part of the capital would now be leaving the Bitcoin ecosystem to flow toward AI-related stocks as well as upcoming tech sector IPOs.

Haeems sums up this difference by saying: “the first two factors are mechanical and naturally time-limited. The third is the one we monitor closely, as it reflects more the investors’ risk appetite than the market structure”. In other words, the first two factors may disappear over time on their own, whereas competition from other asset classes depends more on the general moods of investors.

Inflation, Fed, and Geopolitics: Markets Seek a New Catalyst

The movements observed on Bitcoin ETFs unfold in a particularly charged macroeconomic environment. The war between the United States, Israel, and Iran enters its 103^rd day, fueling tensions in energy markets. Parallelly, US inflation rebounded to 4.2% in May from 3.8% previously. The Federal Reserve’s key rates have remained unchanged in a range of 3.50% to 3.75% for six months.

Analysts disagree on what could revive flows into Bitcoin ETFs in this context. According to Robin Singh, CEO of Koinly, the market could brighten up thanks to bitcoin’s own recovery. “Even though the Consumer Price Index (CPI) was higher than expected, which is not positive for risky assets like bitcoin, I do not think it fundamentally changes the market outlook,” he explains. He states that a sustained return of bitcoin above 70,000 dollars could trigger a rebound of institutional investors’ interest. That’s why he adds: “flows towards ETFs should follow the move”.

Adam Haeems offers another interpretation. For him, US monetary policy is the determining variable. A signal on interest rates, not just a simple price rebound, will put an end to the haemorrhage, he explains. Some elements still offer a slight respite to the markets. The core CPI increased by 0.2% month-over-month, which was well received by bond investors.

Thus, bitcoin price also rose 1.5% in twenty-four hours at about 62,560 dollars. Open interest on derivatives continues to increase while the Coinbase Premium Index remains negative but seems to be bouncing back. These indicators are not enough to confirm a sustained reversal yet, but they show a market that remains attentive to any signal likely to mark the end of this massive withdrawal phase.