"Year-end adjustment phenomenon emerges": Bitcoin and Ethereum ETF fund rebalancing is intense

Around Christmas, the cryptocurrency market experienced a wave of adjustments. The rising phenomenon of outflows from US Bitcoin and Ethereum spot ETF funds indicates that the market is going through a critical period of year-end asset reallocation. Data shows that institutional investors are actively managing risk and tidying up their books, but this does not signal a loss of confidence in crypto assets.

ETF Massive Redemption Wave Hits

During the year-end period, the capital flows of Bitcoin spot ETFs are particularly noticeable. According to SoSoValue data, ETFs recorded a net outflow of $188.6 million on Tuesday, marking the fourth consecutive trading day of capital withdrawal. Among them, BlackRock’s IBIT performed the weakest, with a single-day net outflow of up to $157.3 million; Fidelity’s FBTC and Grayscale’s GBTC also failed to reverse this redemption trend.

The situation for Ethereum spot ETFs is similarly grim. Compared to the previous day’s inflow of $84.6 million, Tuesday saw a sudden net outflow of $95.5 million. Grayscale’s Ethereum ETF (ETHE) experienced the largest outflow, totaling $50.9 million, accounting for the majority of all Ethereum ETF outflows on that day.

Profit-taking or seasonal rebalancing? Analysts’ perspectives

Market analysts have offered various interpretations of this phenomenon. Vincent Liu, Chief Investment Officer at Kronos Research, believes that the ETF capital outflows are mainly due to year-end market mechanisms rather than shaken investor confidence. He points out that liquidity shortages, portfolio rebalancing, and profit-taking are the three main reasons for market weakness.

Nick Ruck, Director of LVRG Research, added another important factor—tax-loss selling. Investors liquidate losing positions at year-end to offset taxes, which also contributes to increased capital outflows.

Presto Research analyst Rick Maeda cautions against over-interpreting short-term changes. He notes that the capital flows of Bitcoin and Ethereum ETFs have been volatile in recent months, and year-end risk reduction and book rebalancing are normal phenomena, especially after increased volatility in Q4.

Historical comparison: this year’s adjustment scale is relatively moderate

Rick Maeda provided more convincing comparative data. During the four trading days before Christmas 2024, Bitcoin spot ETFs experienced over $1.5 billion in net outflows, as the price was correcting from all-time highs. In contrast, this year’s capital retreat has been relatively moderate, reflecting a more stable market sentiment.

Current market situation and signs of divergence

Latest data shows Bitcoin’s price has risen to $90,110, up 1.18% in 24 hours; Ethereum has regained the $3,020 level, up 1.90% in 24 hours. The market is not moving in a single direction but showing signs of divergence.

It’s worth noting that not all crypto ETFs are under selling pressure. Ripple (XRP) spot ETF still saw an inflow of $8.2 million on Tuesday; Solana (SOL) spot ETF also recorded a net inflow of $4.2 million. This indicates that although market sentiment is volatile, there is still demand for allocation to certain projects.

In contrast, the US stock market performed strongly. The S&P 500 rose 0.46% to a new high, the Nasdaq increased 0.57%, and the Dow Jones Industrial Average also rose slightly by 0.16%, showing a rebound in traditional risk appetite.

Liquidity return after the holiday is the key

After the long holiday, the true signals of the market will emerge. Vincent Liu emphasizes that investors should closely monitor three key points: when liquidity will return, whether prices will regain dominance over capital flows, and economic indicators such as US initial jobless claims. These data points will be crucial for observing the market trend in early 2026, and the market’s understanding of the “upward trend” will become clearer at that time.

The US stock market closed early on December 24 and was closed on December 25 for Christmas. It is generally believed that the trading activity at the end and beginning of the year will be decisive for the long-term trend. Investors should stay alert and wait for liquidity and trading volume to reaccumulate after the holiday.