Bitcoin sell-off triggers $1.1B ETF outflows, inexperienced investors hit hardest

A surge of new investors rushed into Bitcoin after Donald Trump’s victory in the US presidential election, expecting further gains as crypto markets soared to all-time highs.

However, the excitement has quickly turned into disappointment.

Barely six weeks into Trump’s presidency, Bitcoin has slumped into a bear market, shedding nearly a quarter of its value since January.

The sudden downturn has hit newer investors the hardest, particularly those who entered the market at its peak or used leverage to amplify their bets.

The world’s largest cryptocurrency, which hit a record $109,071 in January, is now trading at around $80,000.

The selloff is being driven by a broader decline in global equities, concerns over US tariff policies, and rising economic uncertainty.

Meanwhile, Bitcoin exchange-traded funds (ETFs) have recorded massive outflows, with $1.1 billion withdrawn in a single day.

Bitcoin's decline exposes leveraged traders

Bitcoin’s bull run attracted millions of new participants, many of whom had little experience navigating crypto’s volatile cycles.

Glassnode data shows that 20 million new Bitcoin addresses—roughly 1.5% of all addresses in existence—were created in the past three months, reflecting the scale of new investor participation.

Source: Glassnode

However, recent buyers are now facing steep losses.

The spent output profit ratio (SOPR), which measures whether Bitcoin holders are selling at a profit or loss, has fallen to 0.95—its lowest level in over a year.

This suggests that many investors are selling at a loss for the first time since October.

Leveraged traders are bearing the brunt of Bitcoin’s sharp decline.

Data from Bitfinex indicates that realised losses among this group have exceeded $800 million per day, with February 28 and March 4 registering some of the largest single-day losses.

This wave of liquidations has further intensified the downward pressure on Bitcoin’s price.

ETFs see $1.1 billion in single-day outflows

Investment products tracking digital assets have suffered outflows for the fourth consecutive week, according to CoinShares.

Assets under management in crypto funds have dropped by $4.75 billion, bringing the total to $142 billion—the lowest since mid-November 2024.

US spot Bitcoin ETFs, which saw record inflows earlier in the year, have now reversed course.

On February 25, these funds experienced $1.1 billion in outflows—the largest daily withdrawal since their launch in January 2024.

This suggests that institutional investors, who initially drove Bitcoin’s rally past $100,000, may now be shifting capital elsewhere amid deteriorating risk sentiment.

Market volatility spikes as Bitcoin tracks equities

Bitcoin’s price movements have increasingly mirrored those of traditional financial markets.

Recent volatility in US equities, particularly in the tech sector, has spilled over into crypto markets, causing sharp fluctuations in Bitcoin and Ethereum prices.

Derivatives data from Amberdata shows that implied volatility for Bitcoin has surged to 69% in the past 24 hours, while Ethereum’s implied volatility has jumped from 65% to 90% since Monday.

This suggests traders are bracing for further turbulence ahead.

Despite the current selloff, some analysts remain optimistic.

Historical patterns indicate that Bitcoin has often rebounded from similar downturns in the past.

However, with macroeconomic uncertainty, regulatory concerns, and risk-off sentiment prevailing, the near-term outlook remains highly uncertain.