The U.S.-listed spot bitcoin BTC$92,122.27 exchange-traded funds (ETFs) saw billions in outflows in recent weeks amid a 35% price plunge from $125,000 to the low $80,000s, sparking talk of institutional capitulation.

Yet data analysis by Amberdata presents a far more nuanced picture: concentrated redemptions from "basis trade," or arbitrage bets closures, not broad panic across ETFs, with total holdings staying robust at 1.43 million BTC.

"Nearly $4 billion in Bitcoin ETF outflows since mid-October. Price collapsed from $125,000 to the low $80,000s - a 35% drawdown that erased six months of gains. The prevailing interpretation: institutions had arrived, seen enough, and were leaving," Michael Marshall, head of research at Amberdata, said in a report.

"The selling, however, was highly concentrated among a few issuers and tied to a mechanical basis trade unwind, not broad investor fear," Marshall added.

What capitulation?

Capitulation in financial markets occurs when sellers exhaust themselves after prolonged declines, typically marked by panic selling, high volume, and extreme fear indicators.

In the ETF context, true capitulation would entail broad selling across issuers and massive redemptions. But that wasn't the case over the past two months.

Marshall noted that BlackRock dominated 97%-99% of more recent weekly outflows despite holding only 48-51% of assets under management while Fidelity FBTC registered inflows and other smaller ETFs held steady.

Meanwhile, over the full 53-day window from Oct. 1 to Nov. 26, Grayscale bled $923 million, which is 53.2% of total gross outflows, followed by 21Shares and Grayscale Mini. Together, these three accounted for 89.1% of outflows. By contrast, BlackRock and Fidelity registered inflows.

This dual framing underscores the point: no widespread capitulation, but targeted unwinds. The day-to-day fluctuations in ETF fund flows were highly variable, with a standard deviation of $372 million compared to an average daily flow of $27 million.

Targeted unwinds driven by carry trades

The culprit? Collapsing basis spreads in the spot-futures arbitrage trade, also known as the basis trade, where funds bought ETF shares and sold futures to capture contango yield—direction-neutral, not a BTC price view.

The annualized 30-day basis, or the spread between futures and spot prices, compressed 217 basis points from 6.63% to 4.46%, with 93% of recent days below the 5% breakeven threshold, according to Marshall.

This forced carry traders to unwind – sell spot and buy back futures. The decline in perpetual futures open interest alongside ETF outflows is evidence of that.

Per data tracked by Marshall, BTC perpetual open interest plunged 37.7% ($4.23 billion peak-to-trough), "correlating 0.878 with basis moves", near-lockstep evidence of simultaneous ETF sales and futures short covers.

What next?

With basis traders shaken out, the remaining ETF ownership represents sticky institutional capital betting on long-term price appreciation. In other words, the market is much cleaner and reset for a bigger rally.

"With the arbitrage overhang cleared, remaining flows increasingly reflect genuine allocation rather than yield harvesting. The market that emerges is less leveraged, more conviction-driven, and structurally cleaner than the one that entered October," Marshall said.