U.S. Bitcoin ETFs Face Record Outflow as Carry Trades Lose Shine to 10-Year Treasury

U.S. spot Bitcoin ETFs experienced a record daily outflow of over $930 million on February 25, 2025, marking a significant shift in investor sentiment. This massive capital flight highlights the growing uncertainty among investors regarding the future of Bitcoin ETFs and the broader cryptocurrency market. The primary factors driving this trend are the rising yields of the 10-year U.S. Treasury bonds and the increasing competition among Bitcoin ETFs.

The yield of the 10-year U.S. Treasury bonds has surpassed the average yield of arbitrage strategies on Bitcoin ETFs, making it more appealing for institutional investors to allocate capital in low-risk instruments like Treasury Notes. This dynamic has led to a capital flight from Bitcoin ETFs, as investors seek safer alternatives in a context of economic uncertainty. The recent outflows from U.S. spot Bitcoin ETFs, totaling over $1.5 billion in just two days, underscore the growing preference for low-risk investments.



The Grayscale Bitcoin Trust (GBTC) has been a significant player in this massive outflow, with a net exit of $492 million in a single day. This trend suggests that many investors are liquidating their positions in GBTC, perhaps to rebalance portfolios or seek safer alternatives. The high management fees of GBTC, at 2%, compared to other Bitcoin ETFs, have likely contributed to this capital flight. In contrast, other Bitcoin ETFs, such as those managed by BlackRock and Fidelity, offer lower fees and a more efficient structure, making them more appealing to institutional investors.

The competition among Bitcoin ETFs is likely to intensify in the coming months, with lower-fee funds potentially attracting more investments. The future of Bitcoin ETFs will depend on the trend of interest rates and the ability of these funds to offer more competitive conditions to attract new capital. If the trend of interest rates continues to rise, Bitcoin ETFs may face further outflows, as investors seek safer investments. Conversely, if interest rates remain low or decline, Bitcoin ETFs may experience increased inflows, as investors seek higher potential returns in a low-interest-rate environment.

In conclusion, the recent record outflow of capital from U.S. Bitcoin ETFs highlights the growing uncertainty among investors regarding the future of these funds and the broader cryptocurrency market. The primary factors driving this trend are the rising yields of the 10-year U.S. Treasury bonds and the increasing competition among Bitcoin ETFs. As investors reassess their exposure to Bitcoin through regulated instruments, the future of Bitcoin ETFs remains uncertain, with the potential for greater volatility in the price of Bitcoin and a shift in investor sentiment towards more traditional assets.