Author: Yuanshan Insight
Data Source: Farside Investors, SoSoValue, Federal Reserve H.4.1 Report, CryptoQuant
On the first trading day of 2026, BTC ETF saw a net inflow of $471 million in a single day.
What does this number mean?
In November and December, the total net outflow of spot BTC ETFs was approximately $4.57 billion; among which, the net outflow in December alone was about $1.09 billion.
Many people were frantically cutting losses above 93K, while institutions bought back about one-tenth on January 2.
Simultaneously, the following occurred:
- The Federal Reserve's balance sheet increased by approximately $59.4 billion weekly (WALCL: $6.6406 trillion on 12/31, an increase of about $59.4 billion from 12/24)
- New whales' holdings surpassed 100,000 BTC (worth $12 billion)
- BTC rebounded from 87.5K to 93K (+6.8%)
The simultaneous appearance of these three data points indicates a shift in the funding landscape.
The rise in 2025 relied on "narratives" (halving, ETF launch), while the rise in 2026 will rely on "real money" (Federal Reserve easing, institutional purchases, whale accumulation).
This marks the second phase of the market: a shift from emotion-driven to fund-driven.
01｜What Happened: Three Concurrent Signals
Signal 1: ETF Reverses Selling Pressure
In November and December, the total net outflow of spot BTC ETFs was approximately $4.57 billion; among which, the net outflow in December alone was about $1.09 billion. Retail investors were frantically cutting losses in the 90-93K range, and panic spread.
However, on January 2, the BTC ETF saw a net inflow of $471 million in a single day, the highest single-day inflow since November 11, 2025.
What does this mean? Institutions are stepping in at the point where retail investors are cutting losses.
The data is more intuitive:
BlackRock's IBIT is currently the largest single BTC spot ETF; in terms of trading activity, IBIT is often reported to account for nearly 70% of trading volume.
The total net asset size of spot BTC ETFs is at the hundred billion dollar level.
The cumulative trading volume of U.S. crypto ETFs has surpassed $2 trillion.
Signal 2: Federal Reserve Shifts to Balance Sheet Expansion
In March 2022, the Federal Reserve initiated QT (quantitative tightening), which lasted nearly three years. The essence of QT is to withdraw liquidity from the market, which is the fundamental reason for the decline of all risk assets in 2022-2023.
However, according to authoritative sources (Reuters, Federal Reserve reports, etc.), QT is confirmed to stop/terminate balance sheet reduction on December 1, 2025.
Starting in January, the Federal Reserve not only stopped withdrawing liquidity but also began injecting it.
The Federal Reserve's balance sheet increased by approximately $59.4 billion weekly (WALCL: $6.6406 trillion on 12/31, an increase of about $59.4 billion from 12/24).
Since December, the Federal Reserve has automatically purchased short-term government bonds from the market for the purpose of replenishing reserves (RMP), with about $40 billion in the first week; subsequent market expectations are that the pace of "slow balance sheet expansion to replenish reserves" will be maintained, but at a more controllable scale.
In other words, the key turning point has shifted from "withdrawing liquidity" to "injecting liquidity."
Signal 3: New Whales Accelerate Accumulation
On-chain data shows that new whales are accumulating BTC at a record pace:
New addresses hold over 100,000 BTC, worth about $12 billion.
Tether purchased 8,888 BTC ($780 million) on New Year's Eve 2025, with total holdings exceeding 96,000 BTC.
Long-term holders have shifted to a "net accumulation" state over the past 30 days.
However, there is an important controversy: the research director at CryptoQuant pointed out that some "whale accumulation" data may be misled by the consolidation of internal exchange wallets. After filtering out exchange factors, the actual number of true whale addresses (100-1000 BTC) has slightly decreased.
The real buying pressure mainly comes from: new whales (small dispersed addresses) + ETF institutional purchases.
The commonality of these three signals: money is entering the market, and it is "smart money."
02｜Why Institutions Enter When Retail Investors Cut Losses
First Layer: Federal Reserve Easing Creates a Liquidity Base
The Federal Reserve began QT in March 2022, reducing its balance sheet from $9 trillion to $6.6 trillion, cumulatively withdrawing $2.4 trillion in liquidity.
What happened during QT?
In 2022: the Nasdaq fell 33%, BTC fell 65%
In 2023: interest rates rose to 5.5%, FTX went bankrupt, Luna went to zero
All risk assets were under pressure.
However, in December 2025, QT officially stopped. Starting in January, the Federal Reserve shifted to "reserve management purchases." This is not QE (quantitative easing), but at least liquidity is no longer continuing to flow out and is starting to flow in limited amounts.
What does this mean for BTC?
Referencing history: in March 2020, the Federal Reserve initiated unlimited QE, and BTC rose from $3,800 to $69,000 (+1,715%). This time the scale is much smaller than in 2020, but the direction has changed.
More dollars entering the market will seek high-yield assets. BTC, as "digital gold," is a natural liquidity receiver.
Second Layer: ETF Becomes the "Highway" for Institutional Allocation
In January 2024, the BTC spot ETF launched, significantly lowering the threshold for institutions to allocate BTC.
- No need to learn about private keys, cold wallets, or on-chain transfers
- Compliant channels can be included in the asset allocation of pensions, hedge funds, and family offices
- Good liquidity, can buy and sell at any time, with no withdrawal restrictions
Why was there an outflow in December? Retail investors FOMO chased high prices, buying at 93K.
Why was there an inflow in January? Institutions rationally allocated, buying on dips at 87-90K.
Key data:
- BlackRock's IBIT holds 770,800 BTC, making it the largest single BTC ETF
- The cumulative trading volume of ETFs has surpassed $2 trillion
Before the ETF launch, institutions wanting to allocate BTC had to build their own cold wallets, train teams, and deal with regulatory risks. After the ETF launch, they only need to click a few times in their brokerage accounts.
Third Layer: "Generational Transition" of New Whales
Traditional whales (who entered the market from 2013-2017) may have taken profits at high levels. Their costs are very low (a few hundred or thousand dollars), and 90K represents astronomical profits.
However, new whales (who entered the market from 2023-2026) are stepping in. Their costs are in the range of $50,000 to $70,000, and 90K is just the starting point.
Tether's logic is the most typical: starting in May 2023, they purchase BTC with 15% of their profits each quarter. Regardless of whether BTC is at 60K or 40K, they continue to buy. This has been executed for ten consecutive quarters without interruption.
Average cost is $51,117, current price is 93K, with unrealized gains exceeding $3.5 billion.
This is not luck; it is discipline.
This is a "chip generational transition," shifting from "early believers" to "institutional allocators." Old whales take profits, and new whales step in. The market structure is healthier, and holders are more dispersed.
03｜Three Risks Not to Be Ignored
Risk 1: Controversy Over "New Whale" Data
The research director at CryptoQuant pointed out that recent "whale accumulation" data may be misleading: consolidation of internal exchange wallets can be misinterpreted as "whale buying."
After filtering out exchange factors, the actual number of true whale addresses (100-1000 BTC) has slightly decreased.
The real buying pressure mainly comes from: new whales (small dispersed addresses) + ETF institutional purchases.
What does this mean?
Data must be discerned for authenticity; one should not blindly trust. Real buying pressure still exists, but it is not as exaggerated as the surface data suggests. The market's rise relies more on "continuous small purchases" rather than "large purchases."
This is actually a good thing. It indicates that the market is more dispersed and does not rely on a few large players.
Risk 2: The "Limited Nature" of Federal Reserve Balance Sheet Expansion
Balance sheet expansion is "technical buying to replenish reserves," which is different from QE, and the scale is more controllable. If the market overly interprets this as a 2020-style QE expectation, disappointment will follow.
Current RMP is technical buying, which is not the same as actively injecting liquidity into the market, and the scale is far smaller than the QE of 2020 (when monthly average balance sheet expansion exceeded $100 billion).
In other words, liquidity improvement is limited. BTC will not experience a "mindless surge" like in 2020-2021 (from 4K to 69K). A clearer monetary policy shift (such as interest rate cuts or restarting QE) is needed.
2026 may be a "slow bull market."
Risk 3: The "Time Lag Trap" Between Retail and Institutions
Institutions buy at 87-90K, while retail investors chase at 93K. If BTC pulls back to 88K:
Institutions remain profitable and continue to hold; retail investors get trapped and panic sell.
The result: institutions buy back at lower levels.
This is an eternal cycle:
- Institutions look at a 4-year cycle, while retail investors look at 4-week fluctuations
- Institutions have discipline, while retail investors rely on feelings
- Institutions buy against the trend, while retail investors chase highs and sell lows
The data from November to December is the best proof: retail investors cut losses at 93K (with a total net outflow of about $4.57 billion over two months), while institutions bought at 87K (with a net inflow of $471 million on January 2). Institutions profit from the money retail investors panic-sell.
04｜How This Rally Differs from 2025
2025 Rally: Narrative-Driven
Core Logic: Halving + ETF Launch + Supply Shock Post-Halving
Funding Source: Retail FOMO, Institutional Tentative Allocation
Price Performance: From 25K to 73K (+192%)
Risk: After the narrative is fulfilled, funds retreat (with a total net outflow of about $4.57 billion over November and December).
2026 Rally: Fund-Driven
Core Logic: Federal Reserve Easing + Continuous ETF Inflows + New Whale Accumulation
Funding Source: Institutional Long-Term Allocation, Sovereign Funds, Family Offices
Price Performance: From 87K to 93K (+6.8%, just beginning)
Advantage: Fund-driven growth is more sustainable than narrative-driven growth.
Key Differences:
The driving force has changed: 2025 relied on "expectations," while 2026 relies on "real money." Narratives can change overnight (for example, shifts in SEC attitudes or regulatory policy adjustments), but fund inflows represent real buying pressure.
Sustainability has changed: Narratives will fade (diminishing halving effects, loss of novelty from ETF launches), but funds will remain (institutional allocation is a long-term behavior, not frequently entering and exiting).
Volatility is different: Fund-driven phases experience smaller fluctuations. Institutions do not chase highs and sell lows like retail investors; they have clear allocation plans and discipline.
This means that 2026 may not experience the "wild swings" of 2021, but rather resemble a "slow bull market": gradually climbing with small pullbacks.
Retail investors need to adapt to the new rhythm, avoiding expectations of "doubling overnight" and exercising patience.
Referencing gold from 2019 to 2024, gold rose from $1,300 to $2,700 (+107%) over five years. There were no wild surges, but also no crashes. This is the characteristic of a market led by institutions.
05｜Three Insights for Us
First, learn to understand the movements of "smart money."
Do not follow the K-line; follow the money flow:
- ETF inflows = Institutions are buying
- Federal Reserve balance sheet expansion = Liquidity improvement
- New whales accumulating = Long-term signal
These three indicators are more important than any technical analysis. K-lines can lie (they can create false breakouts, washouts, and fakeouts), but the flow of funds does not deceive.
Second, understand the "time lag" trap.
Institutions buy when retail investors are panicking and sell when retail investors are FOMOing. If you are always chasing highs and cutting losses, you are the one being harvested.
Learn to:
- Buy when institutions buy (even if you are panicking at the time)
- Sell when institutions sell (even if you are excited at the time)
- Use ETF flow data to judge, rather than relying on feelings
Third, 2026 may be a "slow bull market," so be patient.
The "explosive growth" of 2021 will not be repeated. This bull market is more likely to resemble:
- A 5-10% increase each month
- Lasting 12-18 months
- Ultimately reaching new highs, but with a more winding path
If you expect to "get rich overnight," you will be disappointed. But if you are patient, you may find this bull market to be more "comfortable" than the last one. The pullbacks will be smaller, and you won't have to be on edge every day.
Previously, BTC fell from 69,000 to 15,000, a drop of 78%. Many people cut losses at 60,000, 50,000, and 40,000, ultimately feeling completely hopeless at 15,000.
If 2026 is a slow bull market, the pullbacks may only be 15-20%. It could drop from 90,000 to 75,000, rather than from 90,000 to 20,000. In such a market environment, holding is easier, and the mindset is more stable.
One last thing: understanding the dynamics of institutional funds is more important than predicting prices. When you understand the flow of funds, you won't panic when it's time to buy, nor will you be greedy when it's time to sell.
In December, retail investors cut losses at 93K, while in January, institutions increased their positions at 87K. This is the difference.
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