Bitcoin ETFs and Private Credit See Billions in Outflows as Investors Turn Cautious

Private credit faces deeper liquidity pressure as bitcoin ETF outflows signal broader risk concerns

The second quarter proved challenging for bitcoin exchange-traded funds (ETFs), which recorded nearly $5 billion in withdrawals, but the stress was even more severe in the private credit market.

Investors pulled around $4 billion from U.S.-listed spot bitcoin ETFs, with BlackRock’s IBIT accounting for a significant share of June’s outflows, according to SoSoValue data. The withdrawals were largely driven by a shift in investor focus toward artificial intelligence-related opportunities and major deals such as SpaceX’s high-profile IPO. Bitcoin also suffered during the period, falling about 14% in Q2, dropping below $60,000 and marking its third consecutive quarterly decline.

However, bitcoin ETF outflows were relatively small compared with liquidity pressures emerging in the $2 trillion private credit sector. Investors submitted approximately $15.6 billion in redemption requests during the second quarter, though many requests were only partially fulfilled. Fitch data showed that redemption demand surpassed the typical 5% quarterly withdrawal limit at 10 of 16 business development companies (BDCs), leaving some investors waiting for future redemption windows to access the remaining funds.

According to Fitch, average redemption requests increased to 10.3% of outstanding shares in Q2 from 9.7% in the first quarter, although individual fund requests varied significantly, ranging from 1.3% to as high as 38.1% at Blue Owl’s OTIC. Many redemption requests carried over from the previous quarter, when investors also received only partial payouts. Meanwhile, new capital inflows declined by roughly 56% on average, causing most funds to experience net outflows of about 3% relative to their previous-quarter net asset values.

The concern for private credit investors is that redemption pressure may continue. Fitch warned that because BDCs restrict withdrawals to 5% per quarter, unmet redemption requests could keep accumulating and result in elevated outflows in coming quarters.

Different markets, similar warning signs

Bitcoin ETFs and private credit funds operate in very different ways. Spot bitcoin ETFs are highly liquid, publicly traded products where investor selling pressure can directly influence BTC prices. Private credit BDCs, by contrast, are less liquid, long-term lending vehicles that include quarterly limits on withdrawals.

Despite their structural differences, simultaneous outflows from both markets suggest a broader shift toward caution among investors regarding liquidity conditions and risk exposure.

Additional concerns are emerging from energy markets, where the U.S. Strategic Petroleum Reserve has fallen to its lowest level since 1983. A prolonged disruption in energy supplies could leave the government with less capacity to release oil reserves and limit price increases.

Together, these developments point to a more difficult environment for risk assets.

QCP Capital noted that with limited monetary support available, physical market buffers have become increasingly important. The firm highlighted several warning signs, including the decline in the Strategic Petroleum Reserve, Strategy’s first bitcoin sale to help fund dividend payments, and rising private credit redemption requests exceeding withdrawal limits across multiple semi-liquid funds.

“Different markets, same pattern: financial buffers are becoming thinner,” QCP Capital said, emphasizing growing pressure across various areas of the market.

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