Significant $825 Million Outflow from Bitcoin ETFs Due to Tax Loss Harvesting

Recent market trends show that U.S. spot Bitcoin ETFs have experienced substantial institutional selling, leading to a staggering $825 million outflow. This shift is primarily attributed to year-end tax strategies, especially tax loss harvesting. Despite the current turbulence, analysts project that this cycle will normalize soon.

Key Takeaways

U.S. spot Bitcoin ETFs saw $825 million in outflows due to tax loss harvesting strategies.
BlackRock’s IBIT ETF led the outflow with $91.37 million on December 24.

Ethereum spot ETFs also experienced outflows of $52.70 million, while newer products like Solana and XRP ETFs gained capital.

A geographical shift has occurred, with the U.S. being the main seller and Asian buyers stepping in as purchasers.
Whale activity on Binance has diminished significantly, with large holder deposits dropping nearly 50%.
Bitcoin's market behavior is now independent of traditional assets, indicating a potential transition into a bear market phase.

"Tax Loss Harvesting" Drives $825M Outflow From Bitcoin ETFs This Week: Analyst

Major Market Trends

Outflows from Bitcoin ETFs

Over the past week, U.S. spot Bitcoin ETFs have witnessed eight consecutive days of institutional selling, culminating in total outflows around $825 million, driven mainly by tax loss harvesting strategies. Analyst Alek indicates that this trend is temporary and expected to subside soon, particularly as Bitcoin’s quarterly options expiry approaches.

On December 24 alone, U.S. spot Bitcoin ETFs had net outflows of $175 million. BlackRock's IBIT ETF was the hardest hit, recording an outflow of $91.37 million. In contrast, Ethereum spot ETFs saw $52.70 million in outflows. However, newer investment products showed strength, with Solana ETFs attracting $1.48 million and XRP ETFs gaining $11.93 million in new investments.

Bitcoin Tax Loss Harvesting - SosoValue ETF Flow Chart

Geographic Market Changes

There’s been a notable shift in Bitcoin market dynamics, with the United States emerging as the leading seller while buyers in Asia are stepping up their accumulation efforts, according to analyst Ted Pillows. This trend marks a significant reversal from the traditional capital flow patterns typically observed in cryptocurrency markets.

Additionally, whale activity on Binance has sharply declined, with large holder deposits plummeting from $7.9 billion to $3.9 billion. CryptoQuant data shows that monthly whale inflows fell from approximately $7.88 billion to $3.86 billion in December, showcasing a stark drop in a matter of weeks.

Bitcoin Tax Loss Harvesting - BTC cumulative Return by Session Chart

Despite the apparent slowdown, there have been isolated activity spikes, including substantial movements of $466 million among the 100 to 10,000 BTC holders and over $435 million from those holding between 1,000 and 10,000 BTC. The reduction in whale deposits suggests less selling pressure as fewer Bitcoin transfers to exchanges indicate a lower risk of forced liquidation.

However, Binance continues to capture the majority of exchange flows.

Independence in Bitcoin’s Market Behavior

Bitcoin’s trading behavior appears to have diverged from traditional assets, with its correlation to the Nasdaq nearing zero and even turning negative against gold. Analyst Maartunn from CryptoQuant highlights that Bitcoin is no longer trading like a tech stock or a safe haven, effectively establishing its own market regime.

This independence comes as gold and silver prices rise, while Bitcoin remains within a constrained price range. The divergence is attributed to an increased demand for conventional safe assets amidst geopolitical tensions, expectations of lower real interest rates, and easier access for institutions to invest in precious metals.

Bitcoin Tax Loss Harvesting - Bitcoin Apparent Demand Chart

Bitcoin is now predominantly viewed as a high-beta risk asset, rather than primarily a safe haven. This means it is often secondary to gold and government bonds during risk-off scenarios, where capital typically flows first to those safer assets. Recently, Bitcoin's apparent demand turned negative, signaling stagnant new capital inflows despite high price levels.

Moreover, the Short-Term Holder SOPR (Spent Output Profit Ratio) has remained under 1 for an extended period, indicating that recent buyers are exiting at losses or breakeven, thereby contributing to selling pressure during price recovery attempts.

Market Outlook and Bear Scenario

Significantly, the Bitcoin Cycle Momentum Indicator (BCMI) from CryptoQuant has declined below equilibrium yet remains above historical low levels (0.25–0.35), observed during downturns in 2019 and 2023. Analysts suggest this current reading indicates a potential transition into a bear market rather than a mere price correction.

Bitcoin Tax Loss Harvesting - Bitcoin Combined Market Index chart

Nonetheless, analysts stress that this scenario must be closely monitored for confirmation. Among the waning of demand, Polymarket’s odds for Bitcoin hitting $100,000 by year’s end have fallen drastically to just 3%, reflecting the current bearish sentiment.

Despite the prevailing weaknesses, analyst Plan C expresses optimism, maintaining that "Bitcoin will have its moment in the spotlight" in 2026, forecasting a mean reversion against the outperformance of gold and silver in the near future.

At present, Bitcoin is trading at $87,838, down nearly 30% from its October peak of over $126,000.