Cryptocurrency funds see over $1.7 billion outflow in a single week: Market sentiment shifts, where is institutional capital heading?

Bitcoin temporarily fell below the $88,000 threshold, contrasting with the high near $98,000 a week ago, while the US spot Bitcoin ETF experienced consecutive days of net capital outflows. According to the latest data, cryptocurrency investment products saw a net outflow of up to $1.73 billion last week, marking the largest single-week withdrawal since mid-November 2025.

This round of capital outflow was primarily driven by US investors, accounting for nearly $1.8 billion in withdrawals. Institutional funds mainly withdrew from Bitcoin and Ethereum products, with $1.09 billion and $630 million respectively. Market analysis agencies believe that weakening rate cut expectations, persistent negative price momentum, and the failure of cryptocurrencies to participate in the so-called “currency devaluation trades” are the three core drivers behind this capital outflow.

Overview of Capital Outflows

Last week, the cryptocurrency investment market experienced the most significant capital withdrawal since November 2025. A total of $1.73 billion flowed out of various crypto funds, with the US market contributing the majority—close to $1.8 billion.

This capital withdrawal showed clear asset concentration. Bitcoin-related products led the outflows, with $1.09 billion, not only the largest asset class to see outflows last week but also the biggest weekly outflow for Bitcoin products since mid-November 2025. Ethereum products followed, with $630 million flowing out, indicating cautious attitudes among institutional investors toward the two main cryptocurrencies.

The concentration of capital outflows is evident not only across asset classes but also geographically. In stark contrast to the massive outflows from the US, markets such as Switzerland, Germany, and Canada recorded net capital inflows. This regional disparity may reflect differing risk assessments among investors in various markets or differences in regulatory environments and macroeconomic conditions across regions.

Three Major Drivers

The shift in rate cut expectations is the primary factor influencing institutional capital flows. With the release of recent economic data, market expectations for a rate cut by the Federal Reserve in the near term have significantly diminished. In traditional asset allocation logic, interest rate expectations directly influence the attractiveness of risk assets. When the likelihood of rate cuts decreases, high-volatility assets like cryptocurrencies often face re-pricing pressures.

Persistent negative price momentum further reinforces institutional investors’ defensive stance. Since the market correction in October 2025, major cryptocurrencies have failed to establish a sustained upward trend. This price behavior triggers sell signals in many trend-following strategies and risk management models, forcing institutions to reduce their crypto exposure.

The failure of cryptocurrencies to participate in the so-called “currency devaluation trades” is the third key factor. Despite structural issues such as expanding fiscal deficits and high government debt in many economies, cryptocurrencies have yet to convincingly demonstrate their effectiveness as hedges against currency devaluation. This narrative setback has prompted some institutional investors to reassess the role of crypto assets in diversified portfolios.

Market Reactions and Impact

The large-scale capital outflows have already had a noticeable impact on market prices. According to Gate行情 data, as of January 27, Bitcoin hovers around $88,662, down approximately 9.5% from recent highs. Ethereum is also under pressure, currently around $2,939.25, down about 8.2% from its early-month peak.

Market sentiment indicators reflect a clear decline in investor confidence. The widely watched “Crypto Fear & Greed Index” has fallen to 25, entering the “Extreme Fear” zone. This shift in sentiment is especially evident in derivatives markets, where over $670 million in long positions were liquidated in the past 24 hours, with more than 85% of these being long positions.

The performance divergence among different asset classes is noteworthy. While mainstream crypto assets generally face pressure, Solana-related products saw a net inflow of $17.1 million last week. Additionally, Binance-related products attracted $4.6 million in inflows, and Chainlink products received $3.8 million. This divergence in capital flows indicates that even amid broad market stress, institutional investors are still seeking investment opportunities within specific themes and ecosystems.

Institutional Perspectives and Market Analysis

Several research institutions have provided analysis on the current market situation. JPMorgan’s latest report suggests that despite capital outflows, the market may be signaling a bottom. The bank’s analysis team observed that the capital flows into Bitcoin and Ethereum ETFs have stabilized, and selling pressure may be waning.

Market sentiment analysis platform Santiment considers the crypto market to be in an “uncertain phase.” The platform notes that retail traders are withdrawing, with capital and attention shifting toward more traditional assets. Meanwhile, quiet market signals such as stable supply distribution and declining social media discussion volume suggest that a market bottom may be forming.

Differences in behavior between long-term investors and short-term traders are also a focus. Crypto analyst Bob Loukas publicly stated, “Market sentiment has bottomed out; perhaps we are overdue for a strong countertrend rally.” This view reflects some market participants’ perception of the current oversold conditions, viewing this correction as a potential long-term investment opportunity.

Divergence and Opportunities

A notable phenomenon is the divergence in performance between traditional safe-haven assets and cryptocurrencies. Gold prices have recently continued to rise, while Bitcoin, often called “digital gold,” has shown weakness. This divergence highlights the differing narrative drivers for traditional safe assets versus crypto assets in the current environment. Gold’s rise is mainly driven by geopolitical uncertainties and real interest rate expectations, whereas cryptocurrencies are more influenced by liquidity expectations and risk appetite.

From a capital flow perspective, macroeconomic cycles typically do not see all asset classes inflow simultaneously. Currently, capital may still be transitioning from traditional safe assets to risk assets. This suggests that cryptocurrencies, as the tail end of the risk curve, often receive liquidity support last. Once inflows begin, their resilience may surpass that of traditional assets.

During market corrections, investor behavior data also show some positive signals. Most long-term holders have not participated in large-scale sell-offs, and the supply structure remains relatively stable. Additionally, key liquidity indicators on major exchanges and trading products have not deteriorated significantly, and market depth remains healthy. These structural features provide a foundation for potential rebounds.

Key Data Comparison

As the total crypto market cap briefly dipped below $3 trillion, investors’ attention has shifted to the next potential catalyst. JPMorgan analysts believe that clear signs of a bottom have emerged, and the major capitulation phase is largely complete. Meanwhile, the widening performance gap between gold and cryptocurrencies is prompting a reassessment of the “digital gold” narrative.

When market sentiment hits rock bottom, it often signals the start of a new cycle. Investors can track Bitcoin’s latest stable support around $88,662 and Ethereum’s around $2,939.25 on platforms like Gate. The market’s pendulum has swung from greed to fear, and historical experience suggests that such extreme sentiment rarely persists long-term.