American spot Bitcoin exchange-traded funds experienced over $1 billion in net redemptions across three consecutive trading days, yet digital asset manager Bitwise argues these exits do not point to a permanent retreat by big institutional players.
Market participants withdrew another $116 million from these products on Tuesday, driving the cumulative net outflows since Friday up to $1.16 billion, according to figures from SoSoValue.
“I do think it’s related to a short-term risk-off environment rather than a structural change in institutional sentiment,” André Dragosch, who leads research at Bitwise, stated to Cointelegraph.
These capital removals occurred right after a $6.3 billion exploit targeting Binance on Thursday, an event that sparked worries regarding trader trust and the safety of ETF custody systems.
Dragosch explained that the fund reductions stemmed from diminished market morale rather than any underlying anxiety regarding the security of the assets held inside the ETFs.
Institutions are holding on
Dragosch mentioned that capital movements within ETFs demonstrate both long-term institutional adoption alongside short-term shifts in investor psychology.
He referenced a recent survey conducted by Bitwise involving 15 institutional entities, showing that zero of them had decreased their exposure to Bitcoin ETFs during the prior market downturn. United States regulatory disclosures additionally revealed that most institutional investor segments, with the exclusion of hedge funds, largely preserved their allocations.
Related: Bitcoin ETF inflows leave institutional demand unclear: CoinShares
Individual retail participants continue to represent the majority of Bitcoin ETF balances and are generally more prone to reacting sharply to market swings, as noted by Dragosch.
The evaluation conducted by Bitwise revealed that ETF capital entries closely track broader digital asset market sentiment, which experienced a downturn around the time of the Binance breach, he added.
Outflows slow as Bitcoin sentiment improves
The $116 million exit seen on Tuesday represented a deceleration compared to Monday’s $399 million and Friday’s $643 million, thereby lengthening the consecutive sequence of fund withdrawals to three sessions.
The Crypto Fear & Greed Index climbed to 34 from Monday’s level of 26, although it stayed positioned within the “Fear” zone. Bitcoin managed an approximate 1.6% increase over the preceding 24 hours, changing hands close to $78,000 at the time of publication, according to CoinGecko.
This latest round of capital removal brought the yearly net outflows for these investment vehicles up to roughly $153 million for 2026.
Related: Binance traces $6.3B hack to fake job interviews, compromised AI tool
Binance hack raises questions about ETF custody
The security breach at Binance has prompted anxiety among certain industry commentators regarding the custody mechanisms of cryptocurrency ETFs, primarily because prominent funds depend on a very restricted group of custodians.
Dragosch highlighted the distinctions between security protocols utilized by digital asset exchanges versus institutional custodians, pointing out that the Binance incident impacted hot wallets connected directly to the web instead of cold storage solutions.
“In contrast, institutional funds held at Coinbase custody are custodied in cold storage which, by definition, are not connected to the internet,” Dragosch stated.
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Originally published at https://cointelegraph.com/markets/bitcoin-etf-shed-1-16-billion-bitwise-short-term-risk-off?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound.
