Bitcoin ETFs are dominating supply dynamics: Global Bitcoin ETFs now hold over 1.4 million BTC, accounting for more than 7% of the circulating supply, significantly impacting Bitcoin’s scarcity and price stability.

Fund flows reflect market psychology: Daily flow data indicate that investors tend to buy during rallies and sell during dips (inflows peak at price highs, outflows at lows). A contrarian strategy (buying during outflows, selling during inflows) may be more effective.

Innovative metrics reveal market signals:

• Cumulative Flow Divergence: Values above +8 signal overheated market sentiment (price highs), while values near zero or negative suggest undervalued opportunities (price lows).

• Flow Volatility: Recent decreased volatility reflects Bitcoin’s market maturation and higher tolerance for price fluctuations.

• Flow-Weighted Average Price (FWAP): The average cost basis for ETF investors is approximately $105,000, close to the realized price of short-term holders. A drop below this level could trigger panic selling (a potential bottom signal).

Long-term bullish structural factors: ETFs absorb Bitcoin (e.g., 41,000 BTC in August) at a rate far exceeding monthly miner production (≈14,000 BTC), continuously tightening liquidity and forming a long-term price support.

Risk warning: ETF investors may still sell during downturns. Close monitoring of fund flows is essential to mitigate short-term volatility risks.

Conclusion

Expand
Author: On-Chain Mind
Compiled by: Shaw, Golden Finance

An understated force is quietly reshaping market supply dynamics: Bitcoin exchange-traded funds (ETFs). These products have already absorbed 7% of Bitcoin’s total circulating supply. If you haven’t been paying attention to them, you’re missing the most critical piece of the puzzle.

In this article, we delve into ETF fund flows, dissect newly developed cutting-edge metrics for flow analysis to help gauge their impact, and reflect on what these flows reveal about market dynamics and human behavior.

Let’s begin.

Key Takeaways

• Massive Supply Absorption: Global Bitcoin ETFs currently hold over 1.4 million BTC, representing more than 7% of the total supply, influencing scarcity and price stability.

• Flow Patterns and Psychology: Daily and cumulative flow patterns reflect investor behavior, highlighting opportunities to buy during outflows and sell during inflows.

• Custom Metrics for Deep Analysis: New tools like Cumulative Flow Divergence, Flow Volatility, and Flow-Weighted Average Price (FWAP) provide signals for market highs, lows, and investor cost bases.

• Long-Term Bullish Outlook: ETFs are purchasing Bitcoin at a rate exceeding new supply issuance, a structural shift that could support future price appreciation.

A New Era of Bitcoin Adoption
Since their launch in January 2024, U.S. exchange-traded funds (ETFs) have become a transformative force in the Bitcoin ecosystem. These financial products allow both retail and institutional giants to gain exposure to Bitcoin without holding it directly. Given Bitcoin’s fixed supply of 21 million coins, this mechanism profoundly impacts its supply-demand dynamics.

However, an estimated 3 to 6 million BTC are permanently lost due to misplaced private keys, holder deaths, or other irrecoverable circumstances. This reduces the actual circulating supply to roughly 15–18 million BTC, the effective upper limit of available Bitcoin.

Against this backdrop, the fact that ETFs now hold over 1.4 million BTC—equivalent to more than 7% of the maximum supply and potentially over 10% of the circulating supply—highlights the significance of their growing dominance.

Quarterly and Monthly Dynamics
Let’s start by examining the big picture of ETF health.

The total BTC held by all global Bitcoin ETFs has surpassed 1.4 million. Even though this quarter is not yet over, these ETFs have already absorbed over 91,000 BTC. This is a strong quarter, second only to the inflows following the initial ETF launches late last year and the post-election rally.

Breaking it down monthly, the inflow trend is even more striking:

• May to August 2025: Consistent inflows, steadily withdrawing more Bitcoin from the market.

• August alone absorbed 41,000 BTC.

• Daily Bitcoin mining output: ≈450 BTC, or ≈14,000 BTC monthly.

Simply put, this month’s ETF inflows have tripled the new supply entering the system via miners. This absorption behavior exerts sustained upward pressure on prices by tightening available liquidity, potentially explaining why we’ve seen a passive grind higher to recent peaks.

Flow Analysis
Cumulative Flows
The cumulative ETF flow since January 2024 shows a staggering net inflow of $54 billion. The overall trend is "steadily upward," with only brief pauses, indicating consistent passive capital influx.

Cumulative Flow Divergence
One of the most insightful custom metrics derived from this data is the Cumulative Flow Divergence, an oscillator measuring the deviation of ETF flows from their long-term trend. This metric accounts for non-trading days (e.g., weekends) by carrying values forward and applies a 75-day moving average to smooth the data while avoiding excessive noise. The divergence is the difference between daily flows and this average, highlighting accelerations or decelerations in net flows.

Data since March 2024 suggests that when the Cumulative Flow Divergence exceeds +8, it indicates local price highs with above-normal inflows and euphoric market sentiment. Conversely, values near zero or negative signal lows and potentially undervalued entry opportunities. This metric essentially quantifies retail herd behavior and encourages contrarian strategies.

Daily Flows
A closer look at daily ETF flows reveals their correlation with Bitcoin price movements. Inflows dominate during rallies, while outflows surge during pullbacks. This linkage is clear: retail investors, who form the bulk of ETF participants, exhibit buy-high-sell-low behavior. They flock in due to FOMO at peaks and flee due to fear, uncertainty, and doubt at troughs.

The largest outflow occurred in February 2025, when Bitcoin dropped 17% from $100K to $83K, triggering panic selling. Conversely, the largest inflow happened in November 2024 during Bitcoin’s rally from $70K to $90K. These patterns are real-time manifestations of behavioral finance principles, such as herding and loss aversion.

From an educational perspective, this data supports a contrarian strategy:

• Accumulate heavily on red days with significant outflows.

• Reduce buying on green days with inflow spikes.
  It can be that simple.

Flow Volatility
Another layer of analysis is Flow Volatility, which tracks how much daily flows deviate from historical averages. Red areas in the chart below indicate high volatility, often coinciding with significant price swings.

Interestingly, volatility has remained low during the recent $10K drop from all-time highs. This reflects Bitcoin’s maturation: what was once a "crash" is now routine volatility. Three to five years ago, a similar move might have halved the price; today, with a market cap exceeding $2 trillion, it’s a minor blip.

Flow-Weighted Average Price (FWAP)
Perhaps the most innovative metric is the Flow-Weighted Average Price (FWAP), an experimental indicator that weights Bitcoin’s price by daily ETF flows. It calculates the decaying cumulative sum of price-flow products and flows, emphasizing recent activity to reflect current holder sentiment.

I’ve begun viewing this as the ETF version of "Realized Price"—a cornerstone of on-chain analysis representing the average price at which all coins last moved. Similarly, FWAP aims to estimate the average cost basis but for ETF investors.

Currently, the average cost is $105,000, nearly identical to the Short-Term Holder Realized Price. This suggests that even during this pullback, ETF holders are likely still in profit. Recent history shows that when prices fall below this level, panic selling tends to occur, marking local bottoms amid peak pessimism.

The potential of this metric extends to derivatives, such as FWAP-based oscillators and risk indicators, which I’ll refine in the coming weeks. But even now, it offers a unique lens into institutional/retail cost bases—something I haven’t found elsewhere.

Bullish Signals from Supply Tightening
From a macro perspective, the takeaway is clear: ETFs are structurally absorbing Bitcoin supply at a pace far exceeding mining output, fundamentally reshaping supply dynamics. This "supply absorption" is bullish long-term, as it reduces the number of Bitcoins available for spot trading.

But this doesn’t mean it’s "up only." As flows clearly show, investors are happy to sell their coins (or shares) when prices fall. So this is something I’ll watch closely.

This data also reveals surprising insights. While ETFs quietly accumulate vast amounts of Bitcoin, flow data provides a compelling window into human psychology. The emerging metrics discussed here represent the cutting edge of flow-based Bitcoin analysis and will undoubtedly become key tools in my future accumulation strategy.

At the current rate, these ETFs—and the metrics tracking them—will only grow in importance as the market evolves.

Bitcoin ETFs are dominating supply dynamics: Global Bitcoin ETFs now hold over 1.4 million BTC, accounting for more than 7% of the circulating supply, significantly impacting Bitcoin’s scarcity and price stability.

Fund flows reflect market psychology: Daily flow data indicate that investors tend to buy during rallies and sell during dips (inflows peak at price highs, outflows at lows). A contrarian strategy (buying during outflows, selling during inflows) may be more effective.

Innovative metrics reveal market signals:

• Cumulative Flow Divergence: Values above +8 signal overheated market sentiment (price highs), while values near zero or negative suggest undervalued opportunities (price lows).

• Flow Volatility: Recent decreased volatility reflects Bitcoin’s market maturation and higher tolerance for price fluctuations.

• Flow-Weighted Average Price (FWAP): The average cost basis for ETF investors is approximately $105,000, close to the realized price of short-term holders. A drop below this level could trigger panic selling (a potential bottom signal).

Long-term bullish structural factors: ETFs absorb Bitcoin (e.g., 41,000 BTC in August) at a rate far exceeding monthly miner production (≈14,000 BTC), continuously tightening liquidity and forming a long-term price support.

Risk warning: ETF investors may still sell during downturns. Close monitoring of fund flows is essential to mitigate short-term volatility risks.

Conclusion

Expand
Author: On-Chain Mind
Compiled by: Shaw, Golden Finance

An understated force is quietly reshaping market supply dynamics: Bitcoin exchange-traded funds (ETFs). These products have already absorbed 7% of Bitcoin’s total circulating supply. If you haven’t been paying attention to them, you’re missing the most critical piece of the puzzle.

In this article, we delve into ETF fund flows, dissect newly developed cutting-edge metrics for flow analysis to help gauge their impact, and reflect on what these flows reveal about market dynamics and human behavior.

Let’s begin.

Key Takeaways

• Massive Supply Absorption: Global Bitcoin ETFs currently hold over 1.4 million BTC, representing more than 7% of the total supply, influencing scarcity and price stability.

• Flow Patterns and Psychology: Daily and cumulative flow patterns reflect investor behavior, highlighting opportunities to buy during outflows and sell during inflows.

• Custom Metrics for Deep Analysis: New tools like Cumulative Flow Divergence, Flow Volatility, and Flow-Weighted Average Price (FWAP) provide signals for market highs, lows, and investor cost bases.

• Long-Term Bullish Outlook: ETFs are purchasing Bitcoin at a rate exceeding new supply issuance, a structural shift that could support future price appreciation.

A New Era of Bitcoin Adoption
Since their launch in January 2024, U.S. exchange-traded funds (ETFs) have become a transformative force in the Bitcoin ecosystem. These financial products allow both retail and institutional giants to gain exposure to Bitcoin without holding it directly. Given Bitcoin’s fixed supply of 21 million coins, this mechanism profoundly impacts its supply-demand dynamics.

However, an estimated 3 to 6 million BTC are permanently lost due to misplaced private keys, holder deaths, or other irrecoverable circumstances. This reduces the actual circulating supply to roughly 15–18 million BTC, the effective upper limit of available Bitcoin.

Against this backdrop, the fact that ETFs now hold over 1.4 million BTC—equivalent to more than 7% of the maximum supply and potentially over 10% of the circulating supply—highlights the significance of their growing dominance.

Quarterly and Monthly Dynamics
Let’s start by examining the big picture of ETF health.

The total BTC held by all global Bitcoin ETFs has surpassed 1.4 million. Even though this quarter is not yet over, these ETFs have already absorbed over 91,000 BTC. This is a strong quarter, second only to the inflows following the initial ETF launches late last year and the post-election rally.

Breaking it down monthly, the inflow trend is even more striking:

• May to August 2025: Consistent inflows, steadily withdrawing more Bitcoin from the market.

• August alone absorbed 41,000 BTC.

• Daily Bitcoin mining output: ≈450 BTC, or ≈14,000 BTC monthly.

Simply put, this month’s ETF inflows have tripled the new supply entering the system via miners. This absorption behavior exerts sustained upward pressure on prices by tightening available liquidity, potentially explaining why we’ve seen a passive grind higher to recent peaks.

Flow Analysis
Cumulative Flows
The cumulative ETF flow since January 2024 shows a staggering net inflow of $54 billion. The overall trend is "steadily upward," with only brief pauses, indicating consistent passive capital influx.

Cumulative Flow Divergence
One of the most insightful custom metrics derived from this data is the Cumulative Flow Divergence, an oscillator measuring the deviation of ETF flows from their long-term trend. This metric accounts for non-trading days (e.g., weekends) by carrying values forward and applies a 75-day moving average to smooth the data while avoiding excessive noise. The divergence is the difference between daily flows and this average, highlighting accelerations or decelerations in net flows.

Data since March 2024 suggests that when the Cumulative Flow Divergence exceeds +8, it indicates local price highs with above-normal inflows and euphoric market sentiment. Conversely, values near zero or negative signal lows and potentially undervalued entry opportunities. This metric essentially quantifies retail herd behavior and encourages contrarian strategies.

Daily Flows
A closer look at daily ETF flows reveals their correlation with Bitcoin price movements. Inflows dominate during rallies, while outflows surge during pullbacks. This linkage is clear: retail investors, who form the bulk of ETF participants, exhibit buy-high-sell-low behavior. They flock in due to FOMO at peaks and flee due to fear, uncertainty, and doubt at troughs.

The largest outflow occurred in February 2025, when Bitcoin dropped 17% from $100K to $83K, triggering panic selling. Conversely, the largest inflow happened in November 2024 during Bitcoin’s rally from $70K to $90K. These patterns are real-time manifestations of behavioral finance principles, such as herding and loss aversion.

From an educational perspective, this data supports a contrarian strategy:

• Accumulate heavily on red days with significant outflows.

• Reduce buying on green days with inflow spikes.
  It can be that simple.

Flow Volatility
Another layer of analysis is Flow Volatility, which tracks how much daily flows deviate from historical averages. Red areas in the chart below indicate high volatility, often coinciding with significant price swings.

Interestingly, volatility has remained low during the recent $10K drop from all-time highs. This reflects Bitcoin’s maturation: what was once a "crash" is now routine volatility. Three to five years ago, a similar move might have halved the price; today, with a market cap exceeding $2 trillion, it’s a minor blip.

Flow-Weighted Average Price (FWAP)
Perhaps the most innovative metric is the Flow-Weighted Average Price (FWAP), an experimental indicator that weights Bitcoin’s price by daily ETF flows. It calculates the decaying cumulative sum of price-flow products and flows, emphasizing recent activity to reflect current holder sentiment.

I’ve begun viewing this as the ETF version of "Realized Price"—a cornerstone of on-chain analysis representing the average price at which all coins last moved. Similarly, FWAP aims to estimate the average cost basis but for ETF investors.

Currently, the average cost is $105,000, nearly identical to the Short-Term Holder Realized Price. This suggests that even during this pullback, ETF holders are likely still in profit. Recent history shows that when prices fall below this level, panic selling tends to occur, marking local bottoms amid peak pessimism.

The potential of this metric extends to derivatives, such as FWAP-based oscillators and risk indicators, which I’ll refine in the coming weeks. But even now, it offers a unique lens into institutional/retail cost bases—something I haven’t found elsewhere.

Bullish Signals from Supply Tightening
From a macro perspective, the takeaway is clear: ETFs are structurally absorbing Bitcoin supply at a pace far exceeding mining output, fundamentally reshaping supply dynamics. This "supply absorption" is bullish long-term, as it reduces the number of Bitcoins available for spot trading.

But this doesn’t mean it’s "up only." As flows clearly show, investors are happy to sell their coins (or shares) when prices fall. So this is something I’ll watch closely.

This data also reveals surprising insights. While ETFs quietly accumulate vast amounts of Bitcoin, flow data provides a compelling window into human psychology. The emerging metrics discussed here represent the cutting edge of flow-based Bitcoin analysis and will undoubtedly become key tools in my future accumulation strategy.

At the current rate, these ETFs—and the metrics tracking them—will only grow in importance as the market evolves.