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The real Bitcoin fallout will soon ‘be obvious’ after Fed sparks $620m in ETF outflows

The real Bitcoin fallout will soon ‘be obvious’ after Fed sparks $620m in ETF outflows
MarketsSnapshot
Federal Reserve Chair Jerome Powell didn't repeat the phrase "there will be pain" last week, but crypto traders were still rattled. Credit: Darren Joseph
  • Bitcoin ETFs suffered $621 million in outflows last week.
  • Crypto investment firm CoinShares said that the Fed is to blame.
  • A hedge fund manager sees more migraines for crypto.

The Federal Reserve may have triggered the second biggest outflows ever recorded for spot Bitcoin exchange-traded funds — and worse may be to come.

Market watchers sounded the alarm after the Federal Open Market Committee said it will keep interest rates between 5.25% to 5.50%.

The situation resembles August 2022, when Fed Chair Jerome Powell warned that rate hikes will cause “some pain” to the US economy, said Quinn Thompson, founder of crypto hedge fund Lekker Capital.

Back then, spooked investors sold off risk assets, sending benchmarks tumbling.

“In a few weeks’ time, it will be obvious,” Thompson said on X. “This time, he didn’t say it so explicitly because last time the market melted down and they had to ease sooner as a result.”

ETF cascade

The “more hawkish-than-expected Fed meeting” triggered a cascade of outflows from spot Bitcoin ETFs to the tune of $621 million as investors scaled back their exposure, crypto asset manager CoinShares said in a report.

The ETF outflows were the largest Bitcoin has experienced since March.

Bitcoin and other risk-on assets tend to perform better in lower rate environments.

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Total crypto assets under management in ETFs fell 6%, from $100 billion to $94 billion, off the back of outflows and price depreciation.

However, Ethereum investment products saw inflows totalling $13 million.

Lido and Ripple, two of the largest cryptocurrencies by market value, also bucked the trend, racking in $3 million in total.

Crypto wasn’t the only sector impacted.

Investors dumped almost $22 billion from US equity funds over the course of the week, the largest outflows since December 2022.

Crypto market movers

  • Bitcoin is down 1% over the past 24 hours to trade at $65,480.
  • Ethereum is down 0.3% to $3,430.

What we’re reading

Tom Carreras is a markets correspondent at DL News. Got a tip about Bitcoin ETFs and the Fed? Reach out at tcarreras@dlnews.com.