Author: Marcel Deer, CoinTelegraph; Translated by: Tao Zhu, Golden Finance

1. What is the outflow of encryption ETP?

Cryptocurrency ETP provides investment in digital assets through traditional financial instruments. When more funds are out of these products than inflows, this is called “out” rather than “inflow”—that is, more people sell than buy.

Cryptocurrency Exchange Trading Products (ETPs) use crypto assets as their base commodities. Their goal is to provide exchange-traded investments for investors who want to get in touch with cryptocurrencies without buying digital assets directly.

Many investors, especially institutional investors, prefer this approach because it opens up cryptocurrency investment in traditional financial instruments. No need to get involved in unregulated market areas or be responsible for the security of crypto assets.

There are several types of cryptocurrency ETP to choose from, including exchange-traded funds (ETFs), exchange-traded commodities (ETCs), and exchange-traded notes (ETNs). Most notably, the Bitcoin ETF was approved and traded in January 2024. These cryptocurrencies ETPs are widely traded and usually account for the majority of transaction volume – inflows and outflows.

If you have been following the price trends of cryptocurrencies like Bitcoin, you may have seen stories about outflows of crypto ETP funds.

So, what is crypto ETP fund outflow?

This happens when funds flow out of these investment products, indicating that the market is eager to sell its positions. The reasons for this can be varied, including profit-taking, negative market sentiment, or risk adjustments.

Encryption ETP Investment Trends

The outflows of these crypto funds can be large and cause serious market volatility. For example, in March 2025, global crypto products lost $1.7 billion in a week. This compound outflow totaled $6.4 billion in the past five weeks. During this period, 17 consecutive days of outflows were recorded, the longest continuous outflow since 2015.

As an investor, understanding ETP traffic can give insight into the sentiment of institutional investors. This can often signal broader market trends in the coming days and weeks. The outflow can send out a warning signal of dynamic changes in the market. In the case of record outflows, it may indicate a shift in institutional fund perceptions of crypto market risks.

2. Factors that drive the outflow of crypto ETP

ETP outflow is driven by a variety of factors, including economic conditions, industry concerns, regulation, market cycles, etc. These factors can be used to predict upcoming market trends.

So, if ETP outflows can be an effective way to measure changes in market sentiment, it is crucial to understand the drivers of these outflows. Cryptocurrency market changes, may change rapidly with the news cycle. Aside from that, several other common factors are related to driving ETP outflows:

Macroeconomic headwinds: Economic uncertainty and bad news can lead to capital outflows from risky assets. This often includes Fed concerns, inflation data and interest rate uncertainty.

Security issues: Volatility within the industry can make investors nervous, especially during news of fraud and hacking, such as the $1.5 billion Bybit hack in early 2025.

Regulatory development: A shift in stance on cryptocurrencies may lead to capital flows. In particular, anti-cryptocurrency initiatives and taxes may scare ETP investors.

Market Cycle: After the market rises sharply, as institutions enter the profit-taking stage to lock in profits, a pullback begins to appear. This selling behavior takes funds out of the market.

Institutional sentiment: Major financial institutions account for a large part of the market. If they decide to reevaluate their cryptocurrency allocation, capital outflows may begin as the strategy moves to less risky assets.

Technical Indicators: Many investors pay close attention to technical indicators. If the key support level of major cryptocurrencies is broken, the selling pressure will increase rapidly.

Generally, as mentioned above, a variety of factors may trigger a decline in investor sentiment and lead to unprecedented capital outflows. Understanding these factors can help you discover the difference between normal volatility and basic market changes.

3. Impact of ETP outflow on the cryptocurrency market

Cryptocurrency ETP capital outflow is a signal of a major change in sentiment, which in turn will continue to bring downward price pressure to the cryptocurrency market.

The ongoing capital outflow is the reason for concern for cryptocurrency investors, as it indicates a significant shift in investor sentiment towards cryptocurrencies. Long-term capital outflows indicate that market conditions have become particularly severe. Typically, capital outflows start with Bitcoin ETP because it is the most well-known and largest cryptocurrency. The outflow could then spread to ETP in other assets such as Ethereum, ultimately causing the entire cryptocurrency market to lose confidence.

In these periods, you will soon see the direct price pressure of crypto assets gradually penetrate the market. During a massive ETP outflow, cryptocurrencies experience significant price adjustments, which could reach 20% or more in a few weeks.

Liquidity was also affected, with total assets managed (AUM) down billions. With more sellers than buyers on the market, the reduction in liquidity makes selling of many crypto assets more difficult, further increasing downward pressure on prices.

As negative sentiment spread from institutions to retail investors, market sentiment quickly became contagious. When this happens, even the strongest growth momentum may end as an exciting bull market stops.

IV. ETP outflow indicators

UnderstandingKey indicators help provide early warning signals for investors who want to predict large market volatility.

The concentration of funds and understanding regional differences in a specific product can be targetedly monitored to identify investment opportunities. Investors prefer indicators include:

Trading Volume: An abnormal surge in ETP trading volume usually occurs before a large amount of capital outflow events. Often, this surge may herald a significant change in investor sentiment or market conditions. For example, a sharp rise in trading volume may indicate that investors are preparing for or reacting to news, market trends, or changes in sentiment.

Premium/Discount Change: Premium and discount are the difference between the price of an ETP traded in the market and its actual net asset value (NAV) (i.e. the value of the assets held). Changes in premium/discount can provide insight into market sentiment or potential future price trends. For example, if ETP, which is usually traded at a premium, suddenly begins trading at a discount, it may indicate a weaker investor confidence in the underlying asset or a broader market concern.

Leading Product Indicators: Leading Product Indicators are products or assets that tend to indicate broader market trends. For example, changes in the dominant Bitcoin ETF BlackRock iShares Bitcoin Trust (IBIT) may indicate growing institutional interest in Bitcoin, which may herald future market growth. These products usually lead similar assets or wider market areas. The performance of industry-leading products is closely watched by investors as their price volatility can serve as a barometer of future trends in cryptocurrencies and traditional markets, helping to predict broader market changes.

Institutional Shareholding Report: Institutional Shareholding refers to positions held by large investment entities such as mutual funds, pension funds and hedge funds. These companies usually hold large amounts of assets or securities, and their decisions can have a significant impact on the market. Changes in major institutional positions may indicate a change in perceptions of these large players about the market or specific assets. For example, if large institutional investors start to reduce their positions in a particular stock or ETP, it may indicate that investors think the asset’s price will fall or they are adjusting their portfolio based on broader economic factors.

Current momentum indicator: The current momentum indicator tracks the speed at which capital flows into or out of the market or assets. Accelerating outflows often indicate panic or increased market uncertainty as investors are eager to withdraw funds. Instead, slowing outflows indicate that market sentiment is stabilizing because concerns may fade or investors want to re-enter the market. Monitoring these indicators helps investors assess the intensity of short-term (days/weeks) and medium-term (months) market sentiment to see if the market is facing a temporary downturn or a longer period of downturn.

Regional flow differences: Regional flow differences refer to the different capital outflow patterns between different geographical regions. During market selloffs, U.S. investors often rely on their huge market shareThe quota and risk preference take the lead in withdrawing from the market. This could lead to more outflows in the U.S. market compared to other regions. However, these differences may also bring opportunities for international investors, especially when one region shows resilience while others fall into panic. Tracking regional trends is crucial to understand the global dynamics driving market trends and investor sentiment.

Cross-asset correlation: Cross-asset correlation studies the relationship between different asset classes (such as cryptocurrencies and traditional financial markets). Generally, high-risk assets such as Bitcoin tend to be correlated with tech stocks or other volatile assets. When traditional markets experience turmoil (such as stock market declines), cryptocurrency markets may also fall as investors seek hedge. Conversely, during traditional market growth, cryptocurrencies may experience capital inflows as investors seek higher returns. Understanding these correlations allows investors to make smarter decisions by predicting how cryptocurrency markets will respond to the broader economic situation.

V. Encrypted ETP inflows and outflows: Trends and insights from 2024 to the first quarter of 2025

In 2024, despite a small outflow at the end of the year, encrypted ETP inflows hit a record of US$44.2 billion, led by Bitcoin and Ethereum products. However, there was a sharp reversal in 2025, with massive outflows starting in February and net inflows reaching $2.55 billion on March 10.

The following are the main highlights of crypto ETP traffic from 2024 to 2025:

Net inflows in 2024: According to CoinShares, total net inflows in 2024 reached $44.2 billion, a 320% increase from the previous record of $10.5 billion set in 2021.

Bitcoin ETP inflow: Bitcoin ETP inflow alone reached US$38 billion, accounting for 29% of Bitcoin’s total AUM of US$130 billion.

Ether ETP inflows: Ether ETP also performed well, with momentum pushing annual inflows to $4.8 billion at the end of 2024, accounting for 26% of ETH’s $18.6 billion AUM.

Net outflows were smaller in 2024: Although the overall net inflow was positive, there were also periods of outflows, especially during the last trading week of 2024, which was reported on January 6, 2025, with a net outflow of $75 million in that week.

Overall net inflows were positive in 2024: These outflows were small compared to the inflows that year, and overall, there were no significant net outflows in 2024, with a positive net inflow of $44.2 billion.

Strong start in 2025: Strong start in 2025, with $585 million inflows in the first three days of January 2025.

As of 202Net inflows as of February 10, 2025: As of February 10, 2025, net inflows reached $7.3 billion, with five consecutive weeks of inflows, of which the weekly inflows ended on February 10 reached $1.3 billion, of which Ether ETP inflows reached $793 million, surpassing Bitcoin.

Inflow reversal began on February 17, 2025: However, a sharp reversal began in the week ending February 17, 2025, with significant weekly net outflows for the first time at $415 million, according to CoinShares.

The 19-week inflows ended: This marks the 19-week inflows ended after the U.S. election, with a cumulative inflow of $29.4 billion, far exceeding the $16 billion in the 19 weeks before the launch of the U.S. spot ETF in 2024.

Continuous outflows in late February 2025: Outflows continued, with Bitcoin outflows of $508 million as of the week ending February 24, 2025, setting the largest weekly outflow ever at $2.9 billion, with a total outflow of $3.8 billion in three weeks.

Outflows in March 2025: In the week ended March 10, 2025, another $876 million was outflows, bringing the total outflows in the four weeks to $4.75 billion. Starting from the week of March 17, clearing of cryptocurrency ETP has accelerated, with outflows reaching $1.7 billion. This brings the total outflow in the past five weeks to $6.4 billion, according to a CoinShares report.

Cryptocurrency ETP inflows surged; asset management declined (as of March 31): Inflows of global cryptocurrency ETP in the week ended March 30 were US$226 million, compared with US$644 million in the previous week. Despite a two-week positive trend after five consecutive weeks of outflows, by March 28, total asset management had fallen below $134 million. The inflow of altcoins was $33 million after four consecutive weeks of outflows totaling $1.7 billion.

VI. The future of crypto ETP

Although the outflow incident in 2025 is worrying, the continued growth of new ETP varieties entering the market shows that investors' interest in investment in this field is still ongoing.

In particular, given the long-term growth trend of cryptocurrency AUM, the future prospects of cryptocurrency ETP as a powerful investment vehicle and market driver are very bright. In the short term, large amounts of capital outflows may cause investorsConcerned, but even a serious pullback of 20%-30% can recover in a larger market cycle. In fact, many investors believe that these pullbacks are healthy during growth periods because investors will take profits and consolidate their market position.

Regulatory evolution seems to be positive, especially in the United States, where President Donald Trump supports cryptocurrencies. He even signed executive orders to try to improve cryptocurrency regulatory approaches and build strategic Bitcoin reserves and digital asset reserves.

Financial institutions often submit new cryptocurrency ETPs, which are eager to expand their services to investors. In addition to Bitcoin and Ethereum products, Solana and XRP ETP have also attracted great attention after their approval and launch. Despite the sluggish price of Bitcoin and Ethereum ETP, these new products have attracted a large amount of capital inflows.

As the cryptocurrency market continues to evolve, the launch of new ETPs may drive further innovation and attract a wider range of investors. With increasingly clear regulation and growing institutional interest, future products may expand to include other promising cryptocurrencies.

So you can expect the cryptocurrency ETP sector to continue to diversify, with the potential to increase inflows and new market opportunities even in the case of mature assets such as BTC and ETH.