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BTC funds see $1.7 billion in recent inflows

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BTC funds see $1.7 billion in recent inflows

After weeks of steady withdrawals, investors are beginning to allocate fresh capital to U.S. spot bitcoin exchange-traded funds (ETFs).

The shift follows a difficult start to the year for the products. From mid-October, when bitcoin’s price began its downfall, through late February, spot bitcoin ETFs recorded cumulative outflows of about $9 billion, according to data from Bloomberg Intelligence ETF analyst James Seyffart. The category still shows $1.1 billion in net outflows for 2026, but flows have shifted in recent days. Since Feb. 24, investors have added roughly $1.7 billion.

The rebound suggests some investors believe bitcoin may have found at least a short-term floor.

“It was surprising to me that there was basically no dip buying when bitcoin was a falling knife to start the year,” Seyffart said. At the time, software stocks and crypto assets were both sliding, yet investor behavior split. Software ETFs pulled in record inflows as traders tried to time a bottom while bitcoin ETFs continued to see steady withdrawals.

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Those withdrawals were not dramatic, but they persisted.

Now the pattern appears to be reversing. Seyffart said recent price action may have helped restore confidence. Over the weekend, bitcoin held above its recent lows despite geopolitical tensions tied to Iran.

“I think investors are likely feeling a bit more comfortable that we have hit at least a near-term bottom,” Seyffart said. “That higher low this weekend on such massive news had to be a comfort to some.”

The inflows also appear to reflect outright bullish positioning rather than market-neutral trading strategies. Some institutional investors use ETFs and futures together in what is known as a basis trade, where they capture yield from price differences between spot and futures markets.

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But that setup does not appear attractive right now.

Yields tied to those trades remain relatively low, while open interest across CME’s crypto futures and options markets has declined. That drop suggests fewer traders are putting on large derivatives positions that typically accompany arbitrage strategies.

Instead, the ETF inflows look more like straightforward bets on bitcoin’s price direction.

Despite bitcoin falling about 16% this year, nearly all spot bitcoin ETFs still show net positive flows for 2026, with BlackRock’s iShares Bitcoin Trust (IBIT) adding roughly $300 million in capital year-to-date. That dynamic highlights how investors continue to allocate through regulated fund structures even during downturns.

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Nate Geraci, president of the ETF Store, said the flows also reflect growing conviction among large asset managers promoting the funds.

“It’s easy to frame this as BlackRock simply promoting its highest-revenue product,” Geraci said. “But I see it more as the firm doubling down on its conviction that bitcoin belongs in diversified portfolios.”

Geraci noted that BlackRock has many higher-fee ETFs it could spotlight instead. Meanwhile its spot bitcoin ETF, IBIT, is down about 4% this year. Asset managers rarely highlight lagging funds unless they believe strongly in the long-term case, he said.

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Crypto World

Aave’s TVL Falls $8B After $293M Kelp DAO Hack

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Aave’s TVL Falls $8B After $293M Kelp DAO Hack

Total value locked on decentralized lending protocol Aave dropped by nearly $8 billion over the weekend after hackers behind the $293 million Kelp DAO exploit borrowed funds on Aave, leaving roughly $195 million in “bad debt” on the protocol and triggering withdrawals.

Data from DeFiLlama shows that Aave’s TVL fell from about $26.4 billion to $18.6 billion by Sunday, losing the top spot as the largest DeFi protocol. 

Aave v3’s lending pools for USDt (USDT) and USDC (USDC) are now at 100% utilization, meaning that more than $5.1 billion worth of stablecoins cannot be withdrawn until new liquidity arrives or borrows are repaid. 

$2,540 is available to be withdrawn from the $2.87 billion USDT pool on Aave v3 at the time of writing. Source: Aave

Aave’s TVL fall shows how rapidly risk from a single security incident can spread throughout the broader, interconnected DeFi lending market, potentially leading to a severe liquidity crisis.

The incident began on Saturday when hackers stole 116,500 Kelp DAO Restaked ETH (rsETH) tokens worth about $293 million from Kelp DAO’s LayerZero-powered bridge and used them as collateral on Aave v3 to borrow wrapped Ether (wETH).

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Crypto analytics platform Lookonchain said the move created about $195 million in “bad debt” on Aave, which contributed to the Aave (AAVE) token tanking nearly 20% from $112 on Saturday at 6:00 pm UTC to $89.5 about 25 hours later. 

Lookonchain noted that some of the largest crypto whales to withdraw funds from Aave were the MEXC crypto exchange and Abraxas Capital at $431 million and $392 million, respectively.

Source: Grvt

Several crypto networks and protocols tied to rsETH or the LayerZero bridge have paused use of the bridge until the problem is resolved, including DeFi platform Curve Finance, stablecoin issuer Ethena and BitGo’s Wrapped Bitcoin (WBTC).

Aave has frozen several rsETH, wETH markets

Shortly after the Kelp DAO exploit, Aave said it froze the rsETH markets on both Aave v3 and v4 to prevent any suspicious borrowing and later stated that rsETH on Ethereum mainnet remains fully backed by underlying assets.

WETH reserves also remain frozen on Ethereum, Arbitrum, Base, Mantle and Linea, Aave said.

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This incident marks the first significant stress test of Aave’s “Umbrella” security model, which was introduced in June 2025 to provide automated protection against protocol bad debt while enabling users to earn rewards.

Related: Aave DAO backs V4 mainnet plan in near-unanimous vote

Earlier this month, the Bank of Canada found that Aave avoided bad debt in its v3 market by using overcollateralization, automated liquidations and other strategies that shifted risk to borrowers.

In comments to Cointelegraph, Aave defended its liquidation-based model, framing it as a core safety mechanism that protects lenders while limiting downside for borrowers.

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It comes as Aave parted ways with its longest-standing DeFi risk service provider, Chaos Labs, on April 6, following disagreements over the direction of Aave v4 and budget constraints.

Magazine: Are DeFi devs liable for the illegal activity of others on their platforms?