Bitcoin experienced a typical macro hit-and-run over the weekend. On Friday, tariff threats targeted China, impacting risk assets and pushing BTC past $110,000, leading to about $7 billion in crypto positions being liquidated as leverage unwound in a volatile market.
By Sunday night into Monday, the sentiment improved as Trump shared a soothing message regarding China, stabilizing US markets and helping Chinese ADRs to recover. BTC mirrored this with a morning surge, partially regaining its losses.
A key question from this weekend’s volatility is whether the US spot ETF ecosystem, particularly BlackRock’s IBIT, acted as a stabilizer that prevented Bitcoin’s price from plummeting further.
An insightful starting point is the record of creations and redemptions. Earlier last week, US spot Bitcoin ETFs witnessed remarkable activity, with Oct. 6 alone seeing around $1.21 billion in net inflows, marking the largest single-day total in months.
This increase preceded the tariff announcements and indicated that cash was already lining up for wrapped BTC exposure. Even discounting more speculative aggregators, mainstream coverage agreed on this: money was flowing into the wrapper complex leading up to the macro incident.
Then came the selloff. If ETFs had been fragile, one would have expected a flurry of same-day redemptions on Friday; that did not occur. Farside’s daily figures showed US spot-BTC ETF flows concluding Friday, Oct. 10, with only $4.5 million in outflows.
Diving deeper, IBIT garnered $74.2 million while many of its counterparts saw outflows. This is significant because it illustrates the ETF market didn’t react uniformly during the stress day. While some investors sought cash withdrawals, the largest fund issued new shares and accumulated coins. In an environment characterized by forced selling and limited available liquidity, a consistent intake can mitigate the impact of a broader selloff.
The divergence became more pronounced on Monday, Oct. 13, with the data showing a much larger cohort outflow of $326.4 million. Notably, IBIT remained a net buyer, adding $60.4 million. When correlated with price movements, it reveals that the market did not experience an uptick solely due to widespread ETF buying.
It steadied as the largest product continued to gather coins while others were in the red. This situation doesn’t imply IBIT acts as an unbreakable support line, but it clarifies why the weekend downturn didn’t escalate into a rapid descent below $100,000 as headlines calmed.
To grasp these trends, reflect on the beginning of the week. Between Oct. 6 and 8, spot ETFs absorbed massive inflows: several hundred million dollars each day, including one unprecedented intake exceeding $1.2 billion.
These creations supplied fresh BTC to custodians, providing funds a buffer of new shares ahead of the selloff. When volatility struck, investors in these products did not hastily redeem, and IBIT, the fund with the strongest primary-market operations, continued to draw demand.
From a structural perspective, ETF redemptions do not cause immediate selling on exchanges. Authorized participants manage the process by exchanging baskets and hedging through futures and spot markets.
On Oct. 10, the minor net outflow across all funds probably created temporary selling pressure as authorized participants balanced their positions, but IBIT’s inflows counteracted this. The outcome was a balanced market position rather than one-sided hedging, which aided Bitcoin in stabilizing once general market sentiment improved.
There are several important insights we can derive from this.
Firstly, it’s evident that the buyer base is diverse. When markets decline, not all ETF holders respond similarly. On both Oct. 10 and 13, IBIT experienced net creations while its peers recorded redemptions. This indicates a holder composition that can withstand downturns in the largest, low-fee vehicle, while smaller funds see quicker turnover.
For price dynamics, the net effect on the primary market is what truly matters. On the most challenging day, the cohort’s net outflow was minor and partially offset by IBIT’s inflow.
Secondly, pre-shock inflows alter the initial condition. The surge in early October meant custodians already held newly created shares leading into Friday.
This existing stock acted as a stabilizing force. Holders had to make a conscious choice to redeem to translate market stress into primary-market selling. The data shows many refrained; where they did opt out, IBIT’s creations tempered the outflow.
Thirdly, derivatives still dominate the narrative. The $7 billion selloff stemmed from forced position liquidation, not panic among ETF holders.
The ETF flow data adds nuance: a small net negative on Friday, a more significant net negative on Monday, and a continual counterflow at IBIT.
This trend clarifies why Bitcoin didn’t plummet below $100,000 during the macro shock and why the market had the potential to rebound once the policy environment stabilized.
