Bitcoin ETFs sold through 7 of 8 crashes even as Wall Street makes BTC selloffs less violent

Bitcoin ETFs recorded outflows during seven of eight major selloffs, challenging expectations that Wall Street investors would support prices during downturns.

A new DWF Labs report shared with CryptoSlate found that US spot Bitcoin exchange-traded funds consistently lost money during market declines of at least 15% since their January 2024 launch, while attracting inflows throughout all nine major rallies.

The findings challenge the belief that institutional adoption has created a dependable source of buying during market stress. They also expose a paradox in Bitcoin's changing market structure: selloffs have become slower and less frequent, even as ETF investors continue withdrawing billions during downturns.

The research, covering 694 trading days through Oct. 16, found that investors withdrew a record $8.2 billion during Bitcoin's 28.8% decline between May and June 2026. That followed $6.9 billion in withdrawals during the October 2025 to February 2026 downturn, when the cryptocurrency lost nearly half its value.

The two episodes represented the largest ETF withdrawals since the products launched, surpassing the $3.4 billion investors redeemed during the January-April 2025 correction.

DWF Labs found that ETF investors were still withdrawing money at seven of eight market bottoms and purchasing at seven of eight peaks, suggesting institutional flows have largely reinforced existing price trends.

The selling frequently intensified as downturns progressed. In five of the eight corrections, the heaviest withdrawals occurred during the final five trading days before Bitcoin bottomed.

During the May-June 2026 decline, outflows averaged $412 million daily in the final week, while investors withdrew money on 88% of trading days throughout the correction.

The pattern reversed during recoveries, with all nine rallies of at least 15% attracting net inflows. Seven recorded their strongest buying during the final five sessions before the market peaked.

One notable exception emerged during the May-July 2024 correction, when ETFs attracted $2.2 billion despite Bitcoin falling 21.8%. That decline coincided with selling pressure from German government liquidations and Mt. Gox creditor repayments, allowing ETF demand to absorb some of the additional supply.

Otherwise, institutional investors have generally waited for recoveries to become established before returning.

During Bitcoin's April 2025 rebound, ETFs continued losing an average of $40 million daily even as the cryptocurrency gained 9.7%. Inflows subsequently accelerated to $436 million a day after prices had already recovered.

Conversely, one of the largest ETF inflow days, totaling approximately $1.2 billion, coincided with Bitcoin's October 2025 peak, shortly before a prolonged decline.

The research found that ETF flows correlated 0.54 with Bitcoin's performance over the preceding five trading days, compared with just 0.03 for returns over the following five days.

Their correlation with same-day returns was 0.41, suggesting flows and prices often move together without indicating whether fund demand drove the move.

This weakens the usefulness of ETF inflows as a forward-looking market signal, despite their growing prominence in institutional Bitcoin analysis.

After the largest 10% of inflow sessions, Bitcoin appreciated over the following 20 days only 51% of the time, compared with 57% across all trading days.

BlackRock's iShares Bitcoin Trust (IBIT), the market's largest Bitcoin ETF product, offered little additional predictive advantage despite accumulating $65.6 billion in net inflows during the study period.

Its flows correlated only 0.04 with Bitcoin's subsequent five-day returns. Following its largest inflow sessions, Bitcoin advanced over the next 20 days in only 47% of cases.