Cryptocurrency ETF funds are withdrawing at lightning speed—can issuers like BlackRock still make a profit?

The successfully launched Bitcoin and Ethereum spot ETFs attracted massive capital inflows, but recently, several ETF products have faced large-scale capital outflows. Grayscale has lost its market position due to high fees, while the success of BlackRock and Fidelity is limited to mainstream assets, leaving issuers to face intense competition. This article is based on a piece by Prathik Desai, organized, translated, and written by Luffy of Foresight News. (Previous context: BlackRock creates the most successful ETF launch in history: IBIT raises $50 billion, Bitcoin to challenge gold’s status in 2025) (Background: BlackRock’s Bitcoin ETF “IBIT” outperforms all its own funds, earning more than its S&P 500 ETF, which is ten times larger.)

In the first two weeks of October 2025, Bitcoin spot ETFs attracted $3.2 billion and $2.7 billion of inflows, respectively, marking the highest and fifth-highest single-week net inflows of 2025. Prior to this, Bitcoin ETFs were expected to achieve a “zero consecutive weeks of outflows” record in the second half of 2025. However, the most severe crypto liquidation event in history struck unexpectedly. This $19 billion asset wipeout still haunts the crypto market.

In the seven weeks following the liquidation event, Bitcoin and Ethereum ETFs saw outflows in five of those weeks, with amounts exceeding $5 billion and $2 billion, respectively. As of the week of November 21, the net asset value ((NAV)) managed by Bitcoin ETF issuers shrank from about $164.5 billion to $110.1 billion; Ethereum ETF NAV was nearly halved, dropping from $30.6 billion to $16.9 billion. This decline was partly due to price drops in Bitcoin and Ethereum themselves, as well as some tokens being redeemed. In less than two months, the combined NAV of Bitcoin and Ethereum ETFs evaporated by about one-third.

The drop in fund flows reflects not only investor sentiment but also directly affects ETF issuers’ fee income. Bitcoin and Ethereum spot ETFs are “money printers” for issuers such as BlackRock, Fidelity, Grayscale, and Bitwise. Each fund charges fees based on assets held, usually disclosed as an annual rate but actually accrued based on daily NAV. Every day, the trust holding Bitcoin or Ethereum sells part of its holdings to pay for fees and other operational expenses. For issuers, this means annual revenue is roughly equal to assets under management ((AUM)) multiplied by the fee rate; for holders, it means the amount of tokens held is gradually diluted over time.

ETF issuer fee rates range from 0.15% to 2.50%. Redemptions or outflows themselves do not directly cause profits or losses for issuers, but outflows reduce the asset base from which fees can be charged.

On October 3, Bitcoin and Ethereum ETF issuers managed assets totaling $195 billion. At the above fee rates, their fee pool was quite substantial. But by November 21, the remaining asset size of these products was only about $127 billion. Calculating annualized fee income based on weekend AUM, the potential income from Bitcoin ETFs fell by more than 25% over the past two months; Ethereum ETF issuers were hit even harder, with annualized revenue down 35% over the past nine weeks.

The bigger the scale, the harder the fall

From the perspective of individual issuers, fund flow trends show three slightly different patterns.

For BlackRock, its business features both “scale effect” and “cyclical volatility.” Its IBIT and ETHA have become the default choice for mainstream investors allocating to Bitcoin and Ethereum through ETFs. This allows the world’s largest asset manager to collect a 0.25% fee based on a huge asset base, especially lucrative when asset sizes hit records in early October. But it also means that when large holders de-risked in November, IBIT and ETHA became the most direct targets for selling. The data supports this: BlackRock’s Bitcoin and Ethereum ETF annualized fee income dropped 28% and 38%, both exceeding the industry average declines of 25% and 35%.

Fidelity’s situation is similar to BlackRock, just on a smaller scale. Its FBTC and FETH funds also followed the “inflow first, outflow later” rhythm, with October’s market enthusiasm ultimately replaced by November’s outflows.

Grayscale’s story is more about “historical legacy issues.” Once, GBTC and ETHE were the only scalable channels for many US investors to allocate to Bitcoin and Ethereum via brokerage accounts. But as BlackRock and Fidelity led the market, Grayscale’s monopoly has vanished. To make matters worse, the high fee structure of its early products has caused persistent outflows over the past two years.

Market performance in October and November confirmed investor tendencies: when the market is good, funds move to lower-fee products; when the market weakens, positions are cut across the board.

Grayscale’s early crypto products charged fees 6-10 times higher than low-cost ETFs. While high fees can boost revenue data, expensive rates continue to drive away investors, shrinking the asset base from which fees are collected. The remaining funds are often constrained by tax, investment mandates, or operational frictions—not active investor choice. Every outflow serves as a reminder: when a better option appears, more holders will abandon high-fee products.

These ETF data points reveal several key features of current crypto institutionalization.

The spot ETF market in October and November shows that crypto ETF management is as cyclical as the underlying asset market. When asset prices rise and market news is favorable, inflows boost fee income; but once the macro environment shifts, funds withdraw rapidly.

Large issuers have built efficient “toll booths” for Bitcoin and Ethereum assets, but the volatility of October and November proved that these channels are just as vulnerable to market cycles. For issuers, the core challenge is how to retain assets during new market shocks and avoid large swings in fee income as the macroeconomic wind changes.

While issuers cannot prevent investors from redeeming shares during sell-offs, income-generating products can cushion downside risk to some extent.

Covered call ETFs can provide investors with premium income ((Note: A covered call option is an options strategy where investors who hold the underlying asset sell an equivalent number of call option contracts. By collecting premiums, this strategy aims to enhance holdings income or hedge some risk.)), offsetting some of the price decline in the underlying assets; staking products are also a feasible direction. However, such products must first pass regulatory review before being officially launched.

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