In the same week, three seemingly unrelated scenes formed a hidden line of capital migration: on one side, the crypto spot ETFs began to bleed — from October 5 to 9, 2026, HYPE had a cumulative net outflow of $9.4269 million, while 21Shares' crypto spot ETF THYP also saw an outflow of $12.4103 million during the same period. Although THYP has maintained a historical net inflow of $42.44 million since its inception, the withdrawals this week indicate a marginal weakening of passive buying around BTC and ETH; on the other side, traditional software assets continued to strengthen — since the end of June, the software sector ETF IGV has risen about 21%, infrastructure software has increased about 78% year-to-date, and the average revenue for the last quarter exceeded expectations by 3.6%. Application software relied more on valuation reassessment, with revenue surpassing expectations by about 1.4%. In this context, on October 8, JPMorgan specifically recommended Microsoft, ServiceNow, and Snowflake, further providing a new narrative of “technology assets supported by profits” for capital; meanwhile, on October 12, Bank of Korea Governor Rhee Hee-kyung publicly apologized at the National Assembly for insufficient warnings about the risks of single stock leveraged ETFs, acknowledging that regulators did not fully grasp the dramatic fluctuations in the stock market and memory chip sector by the end of May. Although specific corrective measures have yet to be introduced, it has already strengthened investors' cautious expectations towards high-leverage and high-volatility products. The three strands point to the same macro variable: risk appetite and sector rotation are rewriting the direction of capital, and in an environment more sensitive to leverage and volatility, the temporary appeal of crypto spot ETFs has cooled significantly, with marginal funds more inclined to flow into the software sector, where profits and valuation logic are clearer.
Nearly ten million dollars withdrawn from HYPE: cooling signal for crypto ETFs
If regulatory tones and sector rotations are just emotional undercurrents, then the actual movement of capital in crypto spot ETFs has provided a more direct answer. From October 5 to 9, Eastern Time, HYPE spot ETF saw a cumulative net outflow of $9.4269 million, with nearly ten million dollars in capital choosing to withdraw from this product over five trading days. In the same week, 21Shares' crypto spot ETF THYP recorded a net outflow of $12.4103 million, although its total net inflow since inception remains $42.44 million, indicating that funds had previously been continuously buying and allocating to these products. Now, this week’s reverse flow is equivalent to almost a third of the previously accumulated net inflow being “withdrawn” in a short time. The pace is much more urgent than the usual noise of daily applications and redemptions. This report does not provide specific reasons for the capital outflows from these two ETFs; we cannot determine whether it is due to a macro event, regulatory news, or a significant adjustment by a single institution, but the fact that capital chose to exit within the same time window is itself a signal worth noting.
For leading assets like BTC and ETH, the net outflow from spot crypto ETFs primarily changes the scale and direction of passive buying and selling. When holders redeem shares, funds need to correspondingly reduce their holdings in underlying assets, whether by direct sales or through market-making structures to transfer risks; the result is that incremental buying both on-chain and off-exchanges has noticeably cooled during these days. In the short term, this weakens the “mechanical buying power” previously provided by the continuous net subscriptions to ETFs, making it easier for prices to fluctuate downwards when macro risks rise, while the weight of on-chain stable assets priced in dollars rises relatively in the portfolio. However, from the overall net inflow status of THYP, it can be seen that long-term funds have not completely denied the allocation value of crypto spot ETFs; structural demand remains. It is just a temporary choice to shrink risk exposure marginally. This results in the weekly net outflow data presenting a complex meaning: it is both a clear signal of cooling risk appetite and a tactical adjustment by capital amidst sector rotation and macro uncertainty, rather than a systemic denial of long-term allocation logic for BTC and ETH.
Software sector strengthens: capital prefers visible profits
At the same time as the crypto spot ETF recorded a net outflow of tens of millions of dollars in the same week, the software sector in traditional tech stocks demonstrated another type of risk appetite. The representative ETF IGV has risen about 21% since the end of June 2026, and more segmented infrastructure software has increased by about 78% year-to-date, with the average revenue last quarter exceeding expectations by about 3.6%, with real profit upgrades backing the market trend; the application software sector, although its average revenue only exceeded expectations by about 1.4%, has also shown impressive market cap performance, more driven by stories of valuation reassessment. This dual-line market of “one side with profits continuing to exceed expectations, the other with valuation logic being rewritten” provides a more “visible return” alternative choice for funds willing to take risks than crypto ETFs.
In its research report on October 8, JPMorgan specifically named Microsoft, ServiceNow, and Snowflake as key allocation targets, further outlining a clear path for capital migration: infrastructure software relies on profit expectation upgrades, while application software depends on valuation reassessment. These two types of assets together constitute a risk asset portfolio that has both cash flow and growth narrative. Within this allocation framework, investors face “profit + valuation” as dual quantifiable variables, rather than the pricing structure of crypto spot ETFs like HYPE and THYP that more depend on liquidity environment, expectations, and the intensity of passive buying. The result is not an overall retreat in risk appetite but rather that funds willing to take on volatility begin to restructure their weighting between both software assets and crypto assets, betting more on the traditional software sector where profit paths are clearer and valuation repricing is more visible.
Regulatory retrospective: follow-up impact of the South Korean leveraged ETF incident
On October 12, at the scene of the National Policy Oversight Committee in the National Assembly, Bank of Korea Governor Rhee Hee-kyung chose to publicly apologize, bringing regulatory lag into the spotlight. He candidly stated, “We failed to issue sufficient warnings regarding the risks of single stock leveraged ETFs, and I apologize to the citizens for this,” and added that by the end of May, “we did not fully grasp the volatility in the South Korean stock market as well as in the memory chip sector.” The meaning of these two statements is not just a technical error, but an acknowledgment that regulatory recognition of the risks associated with high-leverage, single exposure products like single stock leveraged ETFs has evidently lagged behind the market volatility itself, with the reassessment of risk premiums happening passively rather than being the result of forward management.
Currently, public information has not shown that the Bank of Korea or other regulatory bodies have introduced specific corrective plans or new rules, but this live apology in Congress is sufficient to change investor expectations regarding “regulatory tolerance.” The risk centered around single stock leveraged ETFs is being discussed intensively, combined with the global trend towards tighter regulation of high-leverage financial products, making it easy to trigger a cross-market expectation of “de-leveraging” between various assets: products that are built around leverage as their core selling point will require higher regulatory costs and risk premiums in the future. Following this chain of expectations, the leveraged crypto ETPs and high-leverage contract markets cannot remain uninfluenced — even if no direct policy tightening has emerged yet, compliant institutions and large funds are already starting to reduce leverage multiples and shorten durations in their trading structures, decreasing their reliance on extreme volatility and strong liquidation chains. For BTC and ETH, this means that the chase for upward trends driven by high-leverage capital may be suppressed, and the short-term price volatility may cool, but at the same time, structural buying based on high leverage may also be weakened, with risk appetite shifting from “magnifying returns” to “controlling leverage,” marking a price setting of crypto assets in the global risk asset spectrum that begins to reflect more regulatory attitudes towards leverage, rather than just imaginative spaces regarding technological narratives.
Risk appetite and trading structure: from Wall Street to on-chain
When looking at the first week of October on the same screen, the picture is very clear: on one side, HYPE saw a cumulative net outflow of $9.4269 million from October 5 to 9, and THYP saw a further outflow of $12.4103 million during the same period, with over twenty million dollars in total withdrawn from these two crypto spot ETFs; on the other side, since the end of June, IGV has risen about 21%, and the infrastructure software sector has increased about 78% year-to-date, with last quarter's average revenue exceeding expectations by about 3.6%, and application software revenue also averaging exceeded expectations by about 1.4%. Adding to this, JPMorgan on October 8 specifically recommended Microsoft, ServiceNow, and Snowflake as key allocation targets, capital is quietly rebalancing between the “high volatility, story-driven crypto themes” and “verifiable profits, stable cash flow software assets”: while crypto ETFs are losing funds, traditional tech assets with clear profits and valuation logic are undertaking this part of the risk budget.
In this environment of marginal capital cooling in ETFs and regulatory reflection heating up around leveraged products (with the Bank of Korea Governor’s public apology on October 12 acting as a clear signal), the risk premiums and trading structures for BTC and ETH will also be rewritten. Changes in capital for spot crypto ETFs directly affect the willingness of off-exchange institutions to increase or decrease their exposure to coin prices through ETFs: when HYPE and THYP show continuous net outflows, the passive buying pressure at the ETF level weakens, and institutions are more inclined to use futures and on-chain holdings for light leverage and short duration hedging, rather than amplifying volatility exposure under high-leverage structures. This means that market-making and arbitrage funds may shrink their leverage arbitrage across spot, futures, and on-chain, lowering the basis and perpetual contract leverage multiples, while increasing their allocation weight to BTC, ETH, and dollar-denominated stable assets, replacing high beta tokens and complicated structured products with cleaner positions. On-chain, this preference will manifest as: funds linger more on BTC, ETH, and mainstream stable asset positions, shrinking high leverage and long-tail token positions to the corners of their risk budgets. Therefore, what needs to be observed next is whether the fund flows in crypto ETFs continue to cool, whether the software sector maintains its strength, and whether the on-chain position structures further concentrate towards BTC, ETH, and dollar-denominated stable assets, which will decide the relative position of crypto assets in the current round of risk appetite repricing.
The next funding story for crypto assets
The mainline at this stage is already quite clear: in the first week of October, HYPE spot ETF had a net outflow of $9.4269 million, and THYP had a net outflow of $12.4103 million during the same period. Even though THYP has still accumulated a net inflow of $42.44 million since its inception, it cannot hide the capital withdrawal faced by crypto spot ETFs this week; at the same time, JPMorgan concentrated on recommending Microsoft, ServiceNow, and Snowflake on October 8, with IGV rising about 21% since the end of June, infrastructure software increasing about 78% year-to-date with continued profits exceeding expectations, and application software relying on valuation reassessment. The traditional tech stocks' “profits and narratives” are forming a stark contrast to the high leverage narratives on-chain; further compounded by the Bank of Korea Governor’s public apology on October 12, for insufficient communication regarding the risks of single stock leveraged ETFs, acknowledging that regulatory understanding has lagged, and as no new specific regulatory measures have been revealed in public data, this regulatory reflection itself will compress the global market's tolerance for high-leverage tools. In such a funding and regulatory environment, BTC, ETH, and related assets are more likely to rely on endogenous demand in the short to medium term — on-chain application value, demand for dollar-denominated on-chain assets, and the risk reallocation between institutions and retail investors across spot and futures — rather than hoping for a single spot ETF to become a continuous net buyer. The flow of ETFs may even shift from being an accelerator to a thermometer for testing risk appetite. Upcoming observation points include: whether HYPE and THYP continue to see net outflows, whether THYP's historical net inflow is continuously consumed; whether IGV and the infrastructure and application software sectors can maintain relative strength against the market, thereby continuing to absorb risk budget; and whether regulatory statements surrounding single stock leveraged ETFs in South Korea and other markets shift toward stricter risk warnings and limit constraints. The intersection of these funding flows and regulatory orientations will determine whether crypto assets can regain an attractive funding story in the global risk appetite landscape in the next stage.
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