Why Bitcoin Ignores ETF Outflows: February 2026
Why is Bitcoin holding above $68,000 despite four consecutive weeks of ETF outflows totaling $3.74 billion?
The answer isn't institutional sentiment—it's fiscal arithmetic.
TL;DR: Liquidity Trumps Sentiment
- US fiscal deficit: $1.9 trillion projected for FY2026 (5.8% of GDP), injecting sustained liquidity into the private sector
- Bank credit expansion: US commercial lending grew 5.3% YoY in Q4 2025, with business loan demand expected to strengthen throughout 2026
- Bitcoin ETF outflows: $403 million in US outflows week ending February 13, part of a cumulative $3.74 billion 4-week exodus
- Bitcoin price: Currently trading at $68,096, down 46% from October 2025 ATH but stabilizing amid regulatory clarity
Crypto prices follow liquidity flows, not capital rotation narratives. While Bitcoin ETFs hemorrhage assets, the underlying money supply continues expanding through fiscal channels that dwarf ETF movements.
The Fiscal Backdrop: Money Supply Expansion
Through the first four months of fiscal year 2026, the US government borrowed $696 billion—including $94 billion in January alone. The Congressional Budget Office now projects the deficit will reach $1.9 trillion for FY2026, representing a $1.4 trillion increase from prior estimates.
This isn't monetary policy. It's fiscal policy—direct government spending that creates net new financial assets in the private sector. Every dollar the Treasury spends beyond tax receipts adds to household and corporate bank accounts.
Key insight: Bitcoin benefits from the same fiscal and bank credit flows that drive equity markets. A $1.9 trillion deficit injects far more liquidity than $3.74 billion in ETF outflows can drain.
Credit Creation: The Other Liquidity Engine
While fiscal deficits dominate headlines, bank lending continues expanding:
- US loan growth accelerated to 5.3% YoY by late 2025
- Major banks reported strong Q4 performance: Bank of America (8% loan growth), JPMorgan (9%), Wells Fargo commercial lending (12%)
- Banks expect business loan demand to strengthen across all categories in 2026, with most citing stabilized interest rates and higher corporate spending needs
Banks create money through lending—new deposits appear when loans are originated, independent of existing reserves. This credit expansion adds to the liquidity pool available for all risk assets, including crypto.
Global Liquidity: Mixed Signals
China: January new bank loans of 4.7 trillion yuan ($675 billion) fell short of the 5.1 trillion yuan forecast and declined 420 billion yuan year-over-year. Weak private sector credit demand persists despite government stimulus efforts. However, M2 money supply grew 9% YoY, exceeding forecasts, and Beijing announced a more proactive fiscal policy targeting a 4% GDP deficit with front-loaded bond issuance.
Eurozone: The ECB's Q4 2025 bank lending survey revealed unexpected tightening—7% net tightening of credit standards for business loans, with rejected loan applications rising to 5% from 2% in Q3. Banks cited higher perceived risks and concerns about the economic outlook. Housing loan demand grew modestly (3.0% annually), but overall credit conditions remain restrictive.
Net assessment: US liquidity expansion dominates, with China providing targeted support and Europe acting as a modest drag.
Why ETF Outflows Don't Tell the Full Story
Bitcoin spot ETF outflows of $3.74 billion over four weeks represent capital rotation within the financial system, not destruction of liquidity. When investors sell ETF shares:
- ETF sponsors sell underlying Bitcoin
- Proceeds flow to the investors' bank accounts
- Those dollars remain in the financial system, available for redeployment
This is fundamentally different from fiscal tightening (tax increases) or credit contraction (bank deleveraging), which actually remove liquidity from the private sector.
The ETF outflows signal sentiment shifts and portfolio rebalancing, not liquidity destruction. With Bitcoin down 46% from its October 2025 peak of $126,080, some institutional profit-taking is rational risk management.
Regulatory Clarity: The Wildcard
While liquidity provides the fundamental backdrop, regulatory developments in February 2026 offer a structural tailwind:
- Clarity Act: White House convened a second meeting on February 10 to resolve stablecoin yield restriction disputes. Treasury Secretary Scott Bessent is actively pushing for passage, with expectations the bill could be signed into law by July 2026
- SEC support: SEC Chairman Paul Atkins testified on February 11, expressing strong support for the Clarity Act and confirming the agency is prepared to implement it
- Institutional adoption: Approximately 74% of family offices now exploring or actively invested in digital assets, with allocations ranging from 1-3% (pilot) to 7-15% (strategic positions)
Regulatory clarity reduces uncertainty premiums and lowers institutional barriers to entry—but it doesn't create the underlying liquidity that drives sustained price appreciation.
Market Implications: Follow the Liquidity
For investors deciding whether to allocate to crypto in February 2026, the framework is straightforward:
Bullish liquidity factors:
- $1.9 trillion US fiscal deficit (5.8% of GDP)
- 5.3% US bank credit growth with strengthening business loan demand
- Regulatory momentum reducing institutional friction
Bearish/neutral factors:
- ECB credit tightening (7% net tightening for business loans)
- China weak private credit demand despite fiscal stimulus
- Bitcoin ETF outflows signaling near-term sentiment headwinds
The verdict: Net global liquidity remains expansionary, led by massive US fiscal deficits and credit creation. Bitcoin's resilience above $68,000 despite ETF outflows reflects this underlying liquidity support.
Crypto doesn't respond to narratives about institutional adoption or ETF flows in isolation. It responds to changes in the money supply—and that money supply is expanding.
The Takeaway
Bitcoin ETF outflows make headlines, but they're a distraction from the fundamental driver: liquidity creation through fiscal deficits and bank lending.
The US government is on track to inject $1.9 trillion in net new financial assets into the private sector this fiscal year. Commercial banks are expanding credit at 5.3% annually, with business loan demand expected to strengthen.
That's the signal. Everything else is noise.
Crypto follows the money supply. The money supply is expanding. The rest is just portfolio rebalancing within a growing liquidity pool.
Data as of February 18, 2026. Analysis based on CBO fiscal projections, CoinShares ETF flow data, Federal Reserve bank lending surveys, and CoinGecko market data.
