Market liquidity concerns rise as private credit withdrawals surpass bitcoin ETF outflows

Bitcoin ETF outflows attracted significant attention in the second quarter, but the pressure seen in the private credit market was far more severe, pointing to broader concerns about liquidity and investor confidence.

U.S.-listed spot bitcoin ETFs experienced nearly $5 billion in withdrawals during Q2, including roughly $4 billion in outflows during June, according to SoSoValue data. BlackRock’s IBIT was among the funds facing notable redemptions. The decline came as investors shifted capital toward artificial intelligence investments and other major opportunities, including SpaceX’s high-profile public market debut.

Bitcoin also struggled during the quarter, falling about 14% and slipping below the $60,000 level. The move marked the cryptocurrency’s third consecutive quarterly decline.

However, those ETF outflows were relatively minor compared with the challenges facing the $2 trillion private credit industry. Investors sought to withdraw $15.6 billion from private credit funds during the second quarter, though many redemption requests were only partially completed because of fund withdrawal limits.

Data from Fitch showed that redemption demand exceeded the typical 5% quarterly cap at 10 of 16 business development companies (BDCs). As a result, some investors received only a portion of their requested withdrawals and remain queued for future redemption periods.

Average redemption requests increased to 10.3% of outstanding shares in Q2, compared with 9.7% in Q1, according to Fitch. Individual fund requests ranged widely, from 1.3% to 38.1% at Blue Owl’s OTIC. Many investors were continuing withdrawal attempts from the previous quarter after receiving only partial payouts. At the same time, new capital entering the funds declined by around 56%, causing many vehicles to record net outflows of roughly 3% of previous-quarter net asset value.

Fitch warned that redemption pressure could remain elevated as quarterly limits prevent funds from immediately processing all withdrawal requests.

Similar concerns emerge across different markets

Bitcoin ETFs and private credit funds have very different structures. ETFs are liquid, exchange-traded products where investor selling can quickly impact bitcoin prices. Private credit funds are long-term lending vehicles with limited liquidity and built-in redemption restrictions.

Despite these differences, outflows from both areas at the same time reflect increasing investor caution toward risk assets and growing sensitivity around available liquidity.

Energy markets are adding another layer of uncertainty, with the U.S. Strategic Petroleum Reserve now at its lowest level since 1983. If supply disruptions continue, policymakers may have fewer emergency resources available to manage rising oil prices.

These developments suggest a tougher environment for investors seeking exposure to higher-risk assets.

QCP Capital pointed to several warning signs, including reduced energy reserves, Strategy’s first bitcoin sale to help fund dividend commitments, and redemption requests exceeding withdrawal limits across multiple semi-liquid private credit funds.

The firm said these events share a common theme: market buffers are becoming increasingly limited, leaving investors with less protection as financial conditions tighten.