Market-Wide Reset featured Heavy Selling Last Week
Crypto ETFs faced significant selling pressure last week, totaling ($939M) in net outflows. While all major categories recorded negative flows, Ethereum was the most resilient with outflows of ($34M). Altcoins saw ($59M) leave the space. The Bitcoin category remains the largest by far with $111.64B in AUM, but it also bore the brunt of the week’s redemptions, losing ($841M) in five days. The ORO (Arrow Valtoro ETF) stood out as the top performer this week with a gain of 3.59%. Conversely, the HBR (Canary HBAR ETF) and TSOL (21Shares Solana ETF) were the primary laggards, dropping -8.49% and -8.30% respectively.
Crypto markets experienced a sharp risk-off reset this week, with total market capitalization declining 11.5% to $2.72 trillion as macro, regulatory uncertainty, and forced deleveraging converged. Bitcoin fell 10.6% and Ethereum declined 17.2%, extending a downtrend that has been in place since October. ETF flows amplified the move: U.S. spot Bitcoin ETFs recorded more than $1.4 billion in net outflows over the week, signaling institutional de-risking rather than retail-led selling. The shift coincided with a rotation into precious metals and traditional defensive assets, suggesting asset allocators are reducing exposure to high-volatility risk assets broadly rather than expressing crypto-specific bearishness.
Macro developments played a critical role in the tone. The appointment of Kevin Warsh as Federal Reserve Chair candidate catalyzed renewed concerns over tighter financial conditions, reinforcing a hawkish rate outlook. This drove a classic liquidity unwind, contributing to over $2.5 billion in long liquidations across crypto derivatives venues and pressuring both spot markets and ETF flows simultaneously. The result was a feedback loop in which price declines triggered redemptions, which in turn removed a key source of structural demand from the market.
Despite price weakness, on-chain fundamentals painted a more nuanced picture. Bitcoin network activity softened significantly, with active addresses flat and hashrate declining due to miner curtailments linked to severe winter weather in North America. This pushed average block times higher and sets up a projected difficulty reduction of 14–20%, reflecting near-term infrastructure strain. Meanwhile, corporate accumulation remained intact, highlighted by MicroStrategy increasing holdings to over 712k BTC and Binance planning to convert its $1B SAFU reserve into Bitcoin. Ethereum diverged from price action: network usage reached local highs, staking participation climbed to 36.6M ETH, and major ecosystem security initiatives were launched, including the DAO Security Fund, signaling continued long-term institutional preparation despite short-term market stress.
Regulatory developments were mixed but constructive longer term. The SEC clarified that tokenized securities remain subject to full securities laws while opening operational pathways through a new DTC-led pilot allowing blockchain-recorded security entitlements beginning in 2H26. This marks a meaningful step toward institutional-grade tokenization. Meanwhile, a Senate crypto market structure bill advanced out of committee but faces political hurdles, keeping regulatory clarity in progress rather than resolution. Internationally, South Korea is exploring lifting its corporate token issuance ban, another incremental step toward mainstream integration.
Within digital asset sectors, higher-beta segments underperformed as expected in a liquidity contraction. Layer-1 assets broadly declined double digits, while DeFi tokens saw mid-teen weekly losses amid cooling lending activity. Notably, stablecoin supply remains above $300B but growth has plateaued since October’s volatility event, suggesting risk capital is not yet re-entering the ecosystem at scale.
Bottom line: This week’s ETF outflows and price declines reflect macro-driven de-risking and leverage unwinds rather than structural deterioration in crypto network fundamentals. Institutional positioning appears defensive in the short term, but ongoing developments in tokenization infrastructure, staking participation, and corporate treasury adoption indicate that long-term integration between traditional finance and digital assets continues to advance beneath the surface volatility. The next inflection point likely depends on stabilization in macro rate expectations and a slowdown in ETF redemptions, which would signal that the forced selling phase has run its course.
The Digital Asset ETF landscape currently comprises 19 brands managing 66 ETFs with a total of $133B in Assets Under Management (AUM). It was a challenging week for the channel, which saw total net outflows of ($0.93B) over the past five days. This downward trend in sentiment is reflected in the Year-To-Date (YTD) figures, which now stand at ($0.99B) in net flows. Despite the recent pullbacks, the channel maintains a robust long-term growth profile, having attracted $30.86B in net new money over the past year.
