Analysis: Significant net outflows from BTC spot ETFs between May and July reflect absence of institutional buying, suggesting the market may be in the final stage of capitulation

According to ChainCatcher, on-chain data analyst Murphy stated that this cycle, due to the introduction of spot BTC ETFs and significant inflows of traditional institutional funds, the market participation structure is noticeably different from previous cycles. He pointed out that ETF net flows essentially record the results of authorized participants (APs) subscribing and redeeming in the primary market. Net inflow or outflow is only converted into the data when persistent buying and selling pressure in the secondary market pushes the ETF price away from its net asset value and exceeds the arbitrage threshold.

Murphy analyzed glassnode data and noted that from January to February, the market showed “high trading volume + small net outflow,” indicating that despite obvious panic selling at the time, there was still significant buying support. From May to July, however, it showed “low trading volume + large net outflow.” The core signal is not a marked increase in selling pressure, but rather the absence of marginal buying, causing the ETF to remain at a discount and resulting in continuous AP redemptions.

He believes that this stage is more likely to reflect a second round of “capitulation” among institutions, which usually signals the tail end of the market clearing cycle. He judges this may offer new opportunities for retail investors to position themselves, though current data cannot provide a clear answer regarding the duration.