ETF Redemptions

Definition ∞ ETF redemptions occur when investors sell their shares in an exchange-traded fund, prompting the fund to sell underlying assets to meet those requests. In the context of crypto ETFs, this means the fund liquidates a portion of its digital asset holdings, such as Bitcoin or Ether, to return capital to exiting shareholders. This process can exert downward pressure on the price of the underlying digital asset if redemptions are substantial.
Context ∞ The dynamics of ETF redemptions are a significant factor in understanding market pressure on digital assets, particularly with the introduction of spot crypto ETFs. High redemption volumes indicate decreased investor interest or a shift away from these investment vehicles. Market observers closely monitor these flows to assess institutional sentiment and potential short-term market impact.