Does the outflow of funds from Bitcoin ETF mean that Bitcoin has really been sold?

ETF outflows no longer automatically mean that bitcoin is sold in the spot market

Since the U.S. Securities and Exchange Commission (SEC) approved the physical creation and redemption mechanism for spot bitcoin and Ethereum ETFs, CoinDesk reported (the decision dates back to July 29, 2025), funds can now deliver actual bitcoin or Ethereum directly to authorized participants, rather than cash. Therefore, large one-day outflows may reflect a transfer of tokens rather than a forced sell-off. Whether a specific outflow triggered a real spot sell-off depends on which settlement method is used, and this detail was not released with the total outflow data.

The actual meaning of creation and redemption

According to crypto.news, a spot bitcoin ETF is held by a custodian of real bitcoin and issues tradable shares of shares on a stock exchange. The number of stocks is not fixed: when demand exceeds supply, new shares are created and Bitcoin enters the fund; when supply exceeds demand, the shares are destroyed and Bitcoin leaves the fund. Crypto.news describes inflows as funds expand and acquire tokens, and outflows as funds shrink and release tokens.

Ordinary investors cannot directly create or redeem shares. This role is assumed by authorized participants, who are the large trading companies and banks that contract with each fund to align the fund's share price with the value of the token behind it. Crypto.news lists Jane Street, Virtu and JPMorgan Securities as examples of such institutions. If buying pressure pushes the fund's share price above its Bitcoin value, authorized participants will deliver Bitcoin or cash to the fund, gain new shares, and sell them to the demand side, which is counted as an inflow. If selling pressure pushes the stock price below the value of the token, the authorized participant will buy the discounted share on the exchange, return it to the fund, and withdraw bitcoin or cash, which is counted as an outflow. Crypto.news points out that traffic data measures the net expansion or contraction of the share pool rather than the much larger ordinary volume of transactions among investors-which does not change the fund's size.

Cash settlement era: January 2024 to July 2025

According to CoinDesk, when the SEC first approved spot Bitcoin ETFs in January 2024, it required all creations and redemptions to be settled in cash. Authorized participants cannot have direct access to Bitcoin. The Block describes in a verbatim excerpt included in this article that the SEC's cash model requires companies such as BlackRock to "take Bitcoin out of storage and sell it immediately" and then return the cash to investors. Under this mechanism, outflows mean that the fund itself must sell bitcoin in the market to raise cash, while inflows mean that the fund needs to buy. During this period, there was a direct and mechanical link between flow data and spot trading pressure.

What changed on July 29, 2025

According to The Block, the SEC voted to approve the physical creation and redemption of crypto exchange-traded products, and subsequently granted accelerated approval of applications from the Nasdaq, NYSE Arca and Cboe BZX exchanges, covering BlackRock's Bitcoin and Ethereum ETFs, as well as products from Ark21, Fidelity, VanEck and Franklin Templeton. CoinDesk's byline sets the decision date as July 29, 2025. Cointelegraph described it only as "an announcement on Tuesday" and did not give a specific date. SEC Chairman Paul Atkins said in a statement that this is "a new day for the SEC" and that the new rules will make crypto exchange-traded products "cheaper and more efficient." Jamie Selvey, director of the SEC's trading and markets division, said the change would bring "flexibility and cost savings" to issuers, authorized participants and investors, Cointelegraph reported.

According to CoinDesk, the practical effect is that authorized participants can now deliver actual bitcoin or Ethereum when creating shares and receive actual bitcoin or Ethereum when redemption shares, without having to settle every transaction in cash. This changes the meaning of reporting outflows: under the cash mechanism, redemption requires the fund to sell bitcoin in the market to raise cash; while physical redemption directly transfers bitcoin from the fund custodian to the authorized participant, without having to sell immediately at the time of redemption. The crypto.news description of this mechanism included in this article is interrupted before explaining how the redemption authorized participants will subsequently handle the bitcoins. Based on the available evidence, this article cannot determine whether these bitcoins are usually sold, held or transferred immediately outside the exchange. It is reasonable to infer that physical outflows no longer guarantee a spot sell-off that day as cash outflows do-but this is only an inference of the structure of the mechanism, not a reported fact about how authorized participants will subsequently handle the tokens.

Example analysis: Outflows in 2026

According to CoinDesk citing SoSoValue data, on May 14, 2026, the U.S. spot Bitcoin ETF recorded a single-day net outflow of US$635 million, the largest since late January 2026. In the five trading days that included the outflow, the fund totaled US$1.26 billion, reducing cumulative net inflows since the ETF was launched in January 2024 to US$58.5 billion from US$59.76 billion a week ago. CoinDesk reported that bitcoin prices were stagnant below their 200-day moving average (about $82,000) and fell to about $79,400 within 24 hours before release, having previously rebounded from $65,000 to more than $80,000. According to CoinDesk data, these 11 U.S. -listed funds absorbed a total of US$3.29 billion in March and April 2026, before this round of outflows occurred.

A month later, during June 2026, the outflow of U.S. spot Bitcoin ETF exceeded US$4 billion, which crypto.news called the worst monthly performance since the product was launched. In the articles included in this article, neither CoinDesk nor crypto.news stated whether redemptions in May or June 2026 were processed in cash or in kind. This means that based on the available evidence, it is impossible to determine how much of these funds represent bitcoins actually sold in the spot market, and how much is bitcoins transferred to authorized participants and arranged for disposal by them.

Does traffic data still affect prices?

In addition to the settlement method issue, CoinDesk also conducted its own statistical tests to determine whether there is a linkage between traffic and price. Using SoSoValue data, CoinDesk calculated the 90-day rolling Pearson correlation coefficient between the percentage change in the daily price of Bitcoin and the percentage change in the cumulative net inflow of ETF. As of the May 14, 2026 article, the coefficient is 0.16, which CoinDesk says is statistically equal to zero and below the February 2026 peak of 0.68. CoinDesk concluded in the article that knowing the direction of traffic on a given day may not provide any clues as to the direction of Bitcoin prices that day, although it added that large redemptions like May 14, 2026 are still important.

This is another independent reason to interpret single-day flow data carefully in addition to cash and physical issues. Even during periods when every outflow forces a real spot sell-off, the correlation between traffic and price may weaken for other reasons, including other buyers and sellers active in the same market, and macro news-CoinDesk's May 2026 report linked the situation to a resurgence of inflation concerns in the United States.

Background of the Size of the ETF Market

These mechanisms exist in a huge pool of assets. Cointelegraph reported that the U.S. spot Bitcoin ETF recorded net inflows for 12 consecutive days, totaling US$6.6 billion. The report was released around the physical approval in July 2025. The same article quoted Bitbo data as saying that these funds held more than 1.298 million bitcoins worth approximately US$152.1 billion. Cointelegraph also reported that BlackRock's iShares Ethereum ETF exceeded US$10 billion in assets in 251 days, which Cointelegraph called the third fastest fund to reach this milestone. These data are all from a single tracker and are not cross-verified with a second data source in this paper.

Information that cannot be disclosed herein

This article cannot determine whether the outflow of US$635 million on May 14, 2026, or the outflow of more than US$4 billion in June 2026 involved authorized participants to settle in cash or in kind. None of the sources cited in this article disclose the specific ratio of cash to physical settlement in individual redemption events after the July 2025 rule change, so it is impossible to say how many of the above figures represent bitcoins that actually entered the spot market, and how much are bitcoins that are transferred to and held by authorized participants.

None of the sources cited in this article have reported on the specific proportion of physical settlements (as opposed to cash settlements) used by individual issuers or funds in creation and redemption activities since July 2025. The rule change made physical settlement possible, but did not make it universal, and the available evidence did not determine its mixing ratio.

The correlation coefficient data (0.68 in February 2026, dropped to 0.16 on May 14, 2026) came from an analysis by CoinDesk, based on SoSoValue data, and according to CoinDesk's own disclosure, the analysis relied on artificial intelligence tools. In the collection of evidence cited here, no independent media has repeated or checked this calculation.

The bitcoin positions and inflows data attributed to Cointelegraph in this article (US$6.6 billion in continuous inflows, 1.298 million bitcoin holdings, US$152.1 billion valuation, and BlackRock Ethereum ETF reaching US$10 billion in 251 days) are all from Bitbo data cited in a single media outlet and are not cross-confirmed with the second tracker in this evidence set. The names of authorized participants mentioned in the article (Jane Street, Virtu and JPMorgan Securities) are only from crypto.news, and this article is not confirmed through any fund prospectus or official authorized participant list.