Crypto Market Sees $1.7 Billion from ETP in Second-Week Exodus Amid Geopolitical Chaos

Key Insights:

• The crypto market recorded its second consecutive week of outflows totaling $1.7 Billion, flipping year-to-date flows to a net negative $1 Billion.
• Bitcoin-focused products lost $1.32 billion, while Ethereum saw $308 million in exits.
• Assets under management have declined by $73 billion since the October 2025 price peaks.

Digital asset investment products bled $1.7 billion last week, marking the second straight week of heavy redemptions that reversed all 2026 gains and pushed year-to-date flows globally into negative territory at $1 billion.

The consecutive outflows signaled a sharp deterioration in investor sentiment toward the crypto market. CoinShares attributes the selloff to three converging pressures that created a perfect storm for risk assets.

On a February 2 report, the firm noted that the Federal Reserve appointed a hawkish chair, shifting monetary policy expectations and dimming prospects for near-term rate cuts.

Meanwhile, whale accounts continued four-year cycle liquidations, dumping holdings accumulated during previous bull runs and adding supply pressure to already fragile markets.

The third pressure factor is the escalation of geopolitical tensions across multiple regions. It rattles the risk appetite of the crypto market traders and sends capital fleeing toward safer havens.

The US recorded the largest outflows, with $1.65 billion in redemptions, followed by Canada with $37.3 million and Sweden with $18.9 million.

Switzerland and Germany provided minor relief with $11 million and $4.3 million inflows, respectively, though these amounts barely registered against the broader tide of redemptions.

The regional breakdown showed pessimism concentrated in North America and Scandinavia, where institutional adoption had previously run strongest.

Bitcoin and Ethereum Lead Exodus

Bitcoin products absorbed the heaviest losses at $1.32 billion, while Ethereum saw $308 million flee as investors rotated from long exposure to defensive strategies.

Other top crypto prices like XRP and Solana couldn’t escape the downdraft, losing $43.7 million and $31.7 million, respectively, as negative sentiment spread across the entire crypto market.

Short Bitcoin positions gained $14.5 million, with bearish bets growing 8.1% in assets under management year-to-date.

The contrarian positioning suggested that traders expected further declines in crypto prices and positioned accordingly, betting against the very products that had attracted billions during previous rallies.

Total assets under management have contracted by $73 billion since the October 2025 highs, exposing the fragility of institutional conviction amid mounting macroeconomic headwinds.

Products that experienced steady accumulation during the 2024 rally now faced sustained redemption pressure, with no clear catalyst emerging to reverse the trend.

Why Crypto Market Structure Matters Now?

ETP flows aren’t abstract sentiment gauges, as they reveal mechanics in the primary market, where authorized participants (APs) create and redeem shares to maintain price alignment.

When redemptions accumulate, APs must reduce product exposure by converting holdings to cash, turning what starts as “paper” selling into real spot execution that can move prices.

US spot crypto ETFs launched with cash-only creation and redemption mechanisms, meaning heavy outflows force trusts to sell underlying assets for cash.

This plumbing can widen spreads during stress periods as market depth declines and liquidity providers step back, creating conditions in which the crypto market absorbs selling pressure through volatile price discovery rather than passive accumulation.

During calm periods, this mechanism functions smoothly as authorized participants arbitrage small discrepancies between share prices and net asset values.

However, it can amplify volatility and create feedback loops in which falling prices trigger additional redemptions during redemption waves, generating further selling pressure in a self-reinforcing cycle.

Crypto Market Insights: Institutional Demand Stalls

Glassnode reported that Bitcoin ETF flows stabilized near zero on a 30-day moving average by late January. It indicates an equilibrium following months of sustained outflows.

Structural selling pressure eased in the crypto market, but fresh demand remained cautious. As institutions adopted a wait-and-see posture rather than aggressive risk-taking, the crypto market is under close watch of the traders.

The recent rebound was modest relative to the accumulation waves in early and late 2024, with Bitcoin trading at a higher price despite weaker inflow momentum.

Spot holder conviction appeared to support crypto prices more than ETF-driven demand, suggesting long-term holders absorbed supply but didn’t provide the buying force needed for breakouts.

Glassnode warned that failure to reclaim persistent inflows left Bitcoin vulnerable to extended consolidation, as the market lacked the external liquidity impulses that previously powered expansion phases.

Without renewed demand flowing through ETF channels, the crypto market faces a structural challenge in sustaining upward moves.

The shift from positive to negative year-to-date flows marked a psychological inflection point for investors who watched 2024’s strong performance.

The hawkish appointment of a Fed chair changed expectations for rate cuts, reducing appetite for risk assets just as geopolitical uncertainty added another layer of concern.

Bright Spots Emerge in Niche Products

Tokenized precious metal products recorded $15.5 million in inflows, benefiting from an on-chain sales surge that drove interest in these hybrid investment vehicles.

The divergence highlighted a selective appetite for alternative structures, with some capital rotating from volatile digital assets into tokenized commodities even as traditional crypto prices faced pressure.

CoinShares data confirmed broad-based negative sentiment across major crypto, cementing the shift from institutional optimism to caution.

The challenge ahead is to rebuild institutional confidence through sustained inflows. Without such inflows, the crypto market faces extended consolidation as structural bids weaken and price discovery tests lower support levels.