Citigroup Says ETF Outflows Drove Bitcoin’s Crash, Not Strategy’s Sale

Bitcoin broke below $67,000 this week as spot exchange-traded funds (ETFs) logged their longest consecutive redemption streak since the products launched in January 2024. Net withdrawals from US spot Bitcoin ETFs totaled $3.77 billion between May 15 and June 2, per Farside Investors’ Bitcoin ETF flow tracker, and Citigroup’s analysts say that sustained institutional exit drove Bitcoin’s decline far more than Strategy’s 32-coin disposal, which captured social-media attention but amounted to less than $3 million in an asset the company still holds at a $63.87 billion cost basis.

Strategy’s 32 BTC That Moved Markets

A Filing That Broke the Pattern

The SEC disclosure arrived June 1. Strategy’s 8-K filing with the US Securities and Exchange Commission (SEC) confirmed the Virginia-based corporate Bitcoin treasury sold 32 coins between May 26 and May 31 at an average price of $77,135 per coin, raising $2.5 million toward funding distributions on the company’s preferred stock. The last time the firm sold any Bitcoin was December 2022, a 704-coin tax-loss harvest reversed within 48 hours when the company repurchased 810 coins at a marginally higher price.

The firm holds 843,706 BTC as of May 31, acquired at a total cost of $63.87 billion. The 32 coins represent roughly 0.004% of that position. Onchain data from Arkham Intelligence had shown the company moving 411.6 BTC from Coinbase Prime to a cold wallet on May 28, pushing prediction-market odds of a near-term sale to 84% before the filing confirmed it. MSTR shares fell roughly 5% to around $151 in the session after the disclosure, and Bitcoin slid toward the $71,400 range.

The Preferred-Stock Connection

Citi characterized the disposal as consistent with a tax-optimization plan disclosed earlier in the year, not a strategic reversal. CEO Phong Le had flagged the new approach on Strategy’s Q1 2026 earnings call. “On our first quarter 2026 earnings call, we said we would proactively manage our convertible debt and use the full range of capital management tools available to us, including the disciplined sale of bitcoin,” Le said in the accompanying press release. The firm’s capital structure spans multiple preferred-stock series, each carrying fixed dividend obligations, and the $2.5 million in sale proceeds flows directly toward those distributions.

• 32 BTC sold May 26 to May 31 at an average of $77,135 per coin
• 843,706 BTC remaining in the treasury as of May 31, acquired at a total purchase price of $63.87 billion
• 0.004% of total holdings liquidated, raising $2.5 million for preferred-stock dividends
• December 2022 the previous time any BTC was sold, in a tax-loss trade reversed within two days

How ETF Flows Became Bitcoin’s Pulse

Citi’s note, circulated June 3, frames Bitcoin’s demand problem in structural terms. The bank estimates that spot Bitcoin ETF flows explain roughly 45% of BTC’s weekly price variation, making institutional fund allocation decisions the most statistically reliable predictor of near-term Bitcoin price direction. When the wrappers bleed outflows, BTC price follows.

The ETFs, which US regulators approved in January 2024, converted Bitcoin from a self-custody asset into something pension funds, family offices and standard brokerage accounts could hold through familiar investment infrastructure. That shift moved the marginal price-setter from on-chain wallet activity and exchange order books to institutional ETF desk decisions. A single session of heavy withdrawals from products like BlackRock’s IBIT or Fidelity’s FBTC now shows up in BTC spot prices within hours.

An announcement of small digital asset treasury selling has had an outsized effect on BTC in our view but does not alter the fundamental backdrop.

The analysts went further in the June 3 note, warning that “we expect sentiment to remain lackluster, especially as the divergence with equity performance remains stark, absent positive news on the regulatory front or ‘de-basement trade’ fears around fiscal positions.” De-basement demand, as Citi uses the phrase, describes the investment thesis that Bitcoin holds value against government fiscal deterioration and currency erosion. Activating it requires specific macroeconomic conditions, independently of ETF flow direction.

The ETF withdrawals fueling the broader crypto liquidation cascade since mid-May have compounded other pressures: geopolitical risk from US-Iran military escalation, cascading long liquidations that briefly dragged Bitcoin to an intraday low of $65,372, and elevated US inflation keeping Federal Reserve rate-cut expectations subdued.

Bitcoin ETFs Set a Redemption Record

Eleven consecutive sessions of net outflows between May 15 and June 2, totaling $3.77 billion combined, set a record for the longest such streak in US spot Bitcoin ETF history. The five largest single-session withdrawals drove the bulk of the cumulative figure.

The monthly picture pushed the damage further. Bitcoin spot ETFs closed May with $2.30 billion in net outflows, the largest monthly withdrawal of 2026 and the steepest since November 2025. April had added $1.97 billion in net inflows; March had added $1.32 billion. May’s exit ran roughly ten times the size of February’s $206 million in net redemptions, yet Bitcoin’s price fell only 3.69% during the month, suggesting institutions reduced exposure at a pace well ahead of price weakness alone.

Cumulative net inflows into all US spot Bitcoin ETFs slipped to approximately $55.79 billion from $58.09 billion in April, reversing nearly the entire first-quarter gain in a single month. BlackRock’s IBIT reportedly recorded one of its largest single-session outflows of its operating history in late May. With ETF desks net selling, the standing bid that had helped absorb organic selling from miners and long-term holders thinned out sharply.

Bitcoin’s Widening Gap From the Equity Rally

Bitcoin’s all-time high of approximately $126,200, reached in October 2025, now sits more than 46% above Thursday’s price. US equity indices held comparatively firm over the same stretch, supported by continuing enthusiasm for artificial intelligence and semiconductor stocks.

For institutional allocators managing combined books across equities and digital assets, that performance gap creates mechanical rebalancing pressure. A BTC position that has lost nearly half its peak value while equities hold steady falls below its target portfolio weighting. Managers facing liquidity needs or AI-stock purchase opportunities reach for the underperforming asset as a funding source, compounding the sell pressure.

K33, the Oslo-based crypto research firm, flagged the dynamic in a note published June 3. K33’s head of research, Vetle Lunde, argued that the market views the opportunity cost of holding BTC as too high against AI-related stocks currently posting gains. The firm, which had called $60,000 the cycle low, revised that assessment to warn of “possible deeper lows.” The capital rotation from Bitcoin toward AI stocks and anticipated tech IPO listings accelerated through the same weeks as the ETF redemption streak.

SBI Holdings Chairman and CEO Yoshitaka Kitao, one of Japan’s most prominent financial executives and a strategic Ripple investor, attributed part of the institutional withdrawal to capital preparation for three anticipated US listings: SpaceX, Anthropic, and OpenAI, whose combined target valuations approach $3.6 trillion. “Although the cryptocurrency market is declining overall, the reason is believed to be that institutional investors and others are raising funds for acquiring shares in the three major upcoming IPOs of SpaceX, Anthropic, and OpenAI,” Kitao wrote in a June 3 post on X.

A 50-50 Bet on Regulatory Relief

The Bill That Could Change the Picture

Citi named positive regulatory developments as the one concrete catalyst that could reverse the demand picture. The bank pointed specifically to the Digital Asset Market Clarity Act (CLARITY Act), the comprehensive US crypto market structure bill that cleared the Senate Banking Committee in a 15-9 bipartisan vote on May 14 and was subsequently added to the US Senate Legislative Calendar as Calendar No. 423. Democratic Senators Ruben Gallego of Arizona and Angela Alsobrooks of Maryland joined all Republicans on the panel, advancing the legislation after a four-month committee delay.

The CLARITY Act would divide regulatory jurisdiction over digital assets between the Commodity Futures Trading Commission (CFTC) and the SEC based on whether a given asset functions as a digital commodity or an investment contract. Kitao said he is “convinced that if the Clarity Act is enacted in the United States, it will bring a positive impact to the cryptocurrency market, including Ripple.” The bank put passage odds for 2026 at roughly 50%, with those odds described as declining.

An Increasingly Crowded Calendar

Getting to 60 affirmative votes on the full Senate floor requires a significant bloc of Democratic support beyond the two who voted in committee. Democrats have conditioned floor support on a conflict-of-interest provision covering government officials’ crypto holdings, including the Trump family’s stake in crypto ventures. White House officials have opposed any language that singles out a specific officeholder rather than applying uniformly to all executive branch employees.

The scheduling math runs parallel to the political obstacle. Per the Senate Banking Committee’s summary of the CLARITY Act’s scope and structure, the bill must be reconciled with a separate market-structure measure that cleared the Senate Agriculture Committee before reaching the floor, a process that has not yet begun. About eight weeks remain before the summer recess in early August, a window already competing with FISA reauthorization, the annual defense authorization act, and the farm bill.

• Senate Banking Committee vote: 15-9 on May 14, two Democrats in support
• Full Senate threshold: 60 votes required, substantial Democratic participation needed
• Unresolved: conflict-of-interest provision on government officials’ crypto involvement, negotiations continuing
• Pending: reconciliation of the Banking Committee bill with the Agriculture Committee’s parallel version before floor scheduling
• The bank’s probability estimate: approximately 50% chance of passage in 2026, and declining

White House officials had set an Independence Day target for clearing Congress. Several lawmakers have since described end-of-July or early-August as the more realistic window, the final stretch before recess begins.

The Clarity Act’s path to a Senate floor vote still requires a reconciled text, a resolved ethics clause, and a week of floor time it has not yet been allocated.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency markets are highly volatile and prices change rapidly. Figures cited are accurate as of publication. Readers should consult a qualified financial professional before making any investment decisions.