Bitcoin ETFs Shaken by Outflows: XRP Inflow

The primary liquidity drain in the crypto market is now a daily occurrence. On February 4 and 5, the combined outflows from major spot Bitcoin ETFs reached $544.9 million and $434.1 million, respectively. This sharp exodus from the largest funds, like IBIT and FBTC, has directly fueled a severe price decline. Bitcoin itself broke below the key $70,000 support level, triggering a cascade of losses across the ETF complex.

The selling pressure has been brutal for ETF holders. The iShares Bitcoin Trust (IBIT), the market's largest vehicle, has seen its shares plunge 27.3% this year. On the day the price broke support, IBIT shares fell more than 13%, marking its steepest single-day drop since August 2024. This isn't just a technical move; it's a sentiment-driven collapse where ETFs are acting as a direct conduit for capital flight from the underlying asset.

Crucially, the pattern suggests this is not leveraged selling. Bitcoin futures Open Interest and Funding Rates did not expand during this period. In other words, the massive outflows from ETFs are not being matched by a corresponding build-up of leveraged long or short positions in the derivatives market. This indicates the selling is coming from direct, unleveraged capital exiting the spot market, which can exacerbate downward momentum without the usual hedging mechanisms.

The XRP ETF Inflow Counter-Flow

While Bitcoin ETFs bleed capital, XRP ETFs are seeing a powerful counter-flow. In early February, XRP ETFs recorded net inflows of 12.6 million XRP, with the weekly total reaching 13.15 million XRP. This inflow pattern, with outflows just 590,000 XRP, has provided a critical floor for the asset's price.

That price action has stabilized after a brutal 20% weekly drop. XRP has retested the $1.50 support and is now trading in a stressed range between $1.54 and $1.60. The stabilization is a direct result of this institutional inflow, which has acted as a buffer against the broader crypto selloff and forced deleveraging hitting high-beta names.

The driver is clear: improved regulatory clarity. The SEC's settlement with Ripple in August 2025 reinforced that XRP is not a security, creating the institutional credibility needed for U.S. spot ETFs. This has attracted $1.37 billion in cumulative net ETF inflows since late 2025, turning sentiment and capital flows in XRP's favor despite the macro headwinds.

Flow Impact and Forward Scenarios

The net effect on market liquidity is starkly negative. The data shows a massive, sustained outflow from the Bitcoin ETF complex, with a total of $1.484 billion in Bitcoin holdings drained over the last ten days. This represents a direct liquidity drain from the core of the crypto market, removing a critical source of institutional capital and spot demand.

This drain is being partially offset by a smaller, but positive, capital flow into XRP ETFs. In early February, XRP ETFs recorded net inflows of 12.6 million XRP, providing a crucial floor for its price. However, this inflow is dwarfed by the Bitcoin ETF outflows. The scale difference means XRP's positive flow is not yet large enough to offset the broader market's liquidity contraction.

The key risk is that XRP inflows may not be sufficient to counterbalance Bitcoin outflows, leaving the overall crypto market with net negative liquidity. This imbalance sets the stage for continued price pressure, as the market lacks a broad-based institutional inflow to absorb selling. The primary drivers of price momentum in the coming weeks will be the divergence in these two flows.

Watch for two key catalysts. First, the direction of Bitcoin ETF flows: stabilization or acceleration of outflows will dictate the pace of the broader selloff. Second, the rate of XRP ETF inflows; sustained or accelerating inflows could help XRP hold its ground and potentially outperform, but they are unlikely to change the negative liquidity trend for the entire market.