Institutional investors may be buying the dip as traders pour $1.7 billion into spot bitcoin ETFs

After weeks of steady withdrawals, investors have begun allocating fresh capital to U.S. spot bitcoin exchange-traded funds (ETFs). From mid-October through late February, these ETFs recorded cumulative outflows of approximately $9 billion. However, since February 24, investors have added about $1.7 billion, indicating a potential shift in sentiment.

This rebound suggests that some investors believe bitcoin may have found a short-term floor. ETF analyst James Seyffart noted surprise at the lack of dip-buying earlier in the year when bitcoin was experiencing significant price drops. While software ETFs saw record inflows during that period, bitcoin ETFs continued to see steady withdrawals.

The recent price action, including bitcoin holding above recent lows over the weekend despite geopolitical tensions, appears to have restored some confidence. Seyffart believes investors are likely feeling more comfortable that a near-term bottom has been reached.

Shift in Investment Strategy

The recent inflows suggest a move towards outright bullish positioning rather than market-neutral trading strategies like basis trades, which involve capturing yield from price differences between spot and futures markets. Yields for these trades remain relatively low, and open interest in CME's crypto futures and options markets has declined, indicating fewer traders are engaging in arbitrage strategies.

Instead, the ETF inflows appear to be straightforward bets on bitcoin's price direction. Despite bitcoin falling about 16% this year, most spot bitcoin ETFs still show net positive flows for 2026. BlackRock's iShares Bitcoin Trust (IBIT) has added approximately $300 million year-to-date, illustrating continued investor allocation through regulated fund structures even during downturns.

Growing Conviction

Nate Geraci, president of the ETF Store, suggests these flows also reflect growing conviction among large asset managers. He views BlackRock's promotion of its spot bitcoin ETF, IBIT, as a doubling down on its conviction that bitcoin belongs in diversified portfolios, rather than solely a revenue-driven strategy. Geraci pointed out that asset managers typically do not highlight lagging funds unless they have strong long-term belief in the asset.