Red Flag Signals from ETF Spot Bitcoin and Ethereum: Organizations Are Shifting to Defensive Postures

The cryptocurrency market is undergoing a subtle yet concerning transition. After an active start to 2025, a structural shift is taking place in the behavior of institutional investors. On-chain data shows that the capital flow into US-based spot Bitcoin and Ethereum ETFs – one of the main growth drivers of this cycle – has turned negative since November. Instead of aggressive accumulation, the market is now characterized by cautious warnings, as leading assets enter a defensive stance.

Reversal of Institutional Capital Flows

On-chain analysis platforms have observed a notable trend: continuous net withdrawals from Bitcoin and Ethereum spot ETF funds lasting over two months. This is not just short-term fluctuation but reflects a fundamental change in the capital allocation psychology of the financial community.

In recent years, ETF capital flows have often been considered as “spot on” – the most accurate indicator – to gauge institutional sentiment. When these funds experience outflows, it signals that large investors are reducing their risk exposure. This creates a significant liquidity gap, which was previously offset by strong buying activity from these institutions.

An interesting factor is the lag between the spot market and ETF capital flows. When Bitcoin and Ethereum prices started weakening from mid-October, selling pressure took about 2-3 weeks to influence the capital allocation decisions of funds. As a result, the withdrawal trend has persisted to date, reflecting unprecedented caution.

Bitcoin and Ethereum Prices Moving Against Capital Flows

As institutional support wanes, both leading assets are struggling to hold key support levels.

Bitcoin (BTC) is currently trading around $90,430 (as of January 9, 2026), with less volatility compared to previous days. However, dropping from the $100,000 level in recent weeks has created a negative sentiment. Rebounds to $92,000–$93,000 have been unsustainable due to a lack of buying volume from institutions. Since mid-December, BTC has been searching for balance in the $85,000–$89,000 range, but these attempts are mainly due to the absence of aggressive selling pressure.

Ethereum (ETH) shows a longer-lasting weakness. After losing the $3,500 mark in early November, rebounds have been unstable. ETH is now trading at $3,080, still unable to break through resistance zones at $3,000–$3,100. Cautious sentiment towards high-volatility assets has been more detrimental to Ethereum than Bitcoin.

Market-Wide Contagion Effect

The weakness is not limited to Bitcoin and Ethereum. It is spreading across the entire ecosystem.

Total cryptocurrency market capitalization is currently around $2.96 trillion, down sharply from $3.7 trillion in early November – a loss of over $740 billion in two months. Since mid-November, capitalization has mainly fluctuated between $2.9 trillion and $3.2 trillion without a clear trend, indicating both buying and selling pressures are weakening.

Large-cap altcoins are also sending warning signals. The CMC20 index is currently around 184 points, down more than 30% from October’s peak, reflecting a trend of capital contraction into Bitcoin – a characteristic of a “risk-off” (risk-averse) phase when investors prioritize capital preservation over high returns.

Waiting for New Signals

Based on various indicators, the cryptocurrency market is currently in a consolidation and defensive phase. Technical signals have not yet shown any clear reversal. With spot ETF funds still experiencing outflows, a strong bullish rally in the coming weeks seems unlikely.

The most probable scenario is that the market will continue to fluctuate within a narrow range, absorbing lingering selling pressures. To break this deadlock, a strong macro catalyst or a clear return of institutional capital is needed. Until then, risk management and patience will be the top strategies.