Bitcoin Derivatives Bullish Despite ETF Outflows

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Derivatives Sentiment Shifts After Record Negative Streak

Bitcoin (BTC) has started to show signs of stabilization after the 30-day average funding rate turned positive, bringing an end to 84 consecutive days of negative funding – the longest such period recorded in the 2020s.

A Tuesday report from K33 Research stated that the move in funding rates reflects a gradual improvement in derivatives market sentiment, even as overall trading activity remains muted.

K33: Negative Funding Linked to Limited Downside and Gradual Recoveries

K33 Research highlighted that extended periods of negative funding typically emerge when traders adopt more defensive positioning. According to the firm, such environments have often coincided with restricted downside risk for BTC and can precede constructive price phases.

“These periods have generally coincided with limited downside in BTC, while the transition back to positive funding has historically marked constructive, though often gradual, recovery periods,” K33’s Head of Research, Vetle Lunde, wrote.

Despite the improvement in funding rates, K33 pointed out that spot market activity has weakened. Spot trading volumes have fallen back to levels last seen in December, indicating that both retail and institutional investors are showing limited conviction. The firm described the recent environment as the lowest spot volume within any rolling 7-day period since February 2024.

“The strongest daily spot volume within any rolling 7-day window has not been this low since February 7, 2024, underscoring the notably drowsy market of late,” K33 wrote.

ETP Holdings and Flows Track Slowing Capital Inflows

Bitcoin exchange-traded product (ETP) holdings have also retreated, returning to levels last observed in February. K33 noted that this reinforces the picture of slowing and less persistent capital inflows into BTC-linked products.

“The stronger relationship between ETP flows and BTC returns likely reflects a fading influence from other supply-side factors, particularly on-chain selling pressure. The weaker relationship observed in 2025 likely stemmed from unusually heavy distribution from long-term holders while BTC traded near all-time highs,” the firm added.

Institutional Demand Cools as ETF Outflows Accelerate

Data from Wintermute supports K33’s view of waning institutional participation. Spot Bitcoin ETFs recorded approximately $1.26 billion in net outflows over the past week, marking a second consecutive week of redemptions and bringing total outflows to more than $2 billion across 14 days.

These recent outflows followed six straight weeks of inflows, a period Wintermute said helped propel BTC from $70,000 to $80,000 in April.

“Two weeks of $1B+ ETF outflows after six weeks of inflows tells you institutions are using strength to crystalize some of the most recent +ve price performance,” Wintermute noted.

The firm commented that institutional buying, which had previously underpinned upward moves in BTC, has now reversed as investors reconsider their exposure at prevailing price levels.

Macro Backdrop Supportive, Crypto Response Muted

Wintermute emphasized that this change in institutional positioning is particularly striking given a backdrop of improving macro conditions. The report cited easing yields and continued resilience in equity markets, with particular strength in AI-related sectors. Under typical circumstances, such an environment would be viewed as supportive for crypto assets, but Bitcoin has yet to show a strong reaction.

Selective Altcoin Activity; HYPE Draws Attention

While broader crypto activity remains subdued, Wintermute observed that altcoin trading has not disappeared entirely but has become more selective. The firm highlighted HYPE as a notable exception, pointing to strong inflows and accumulation patterns that suggest it may be diverging from broader market trends.

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