U.S. Bitcoin ETFs Bleed Record $563M Even as Fed's Powell Rules Out Rate Hike

BTC

As a long-term crypto investor with experience in following market trends closely, I find the recent developments surrounding U.S.-based spot bitcoin ETFs quite concerning. Wednesday’s record $563 million net outflow from these funds is an alarming sign that institutional investors might be losing confidence in the short term.

As a crypto investor, I observed a significant sell-off in U.S.-based Bitcoin spot Exchange-Traded Funds (ETFs) on Wednesday, despite Fed Chairman Jerome Powell’s statement that a rate hike was not imminent on the table.

Over the past five trading days, a total of $563.7 million was withdrawn from the eleven ETFs, marking the largest net withdrawal since their inception on January 11. This drawdown follows a larger trend, with approximately $1.2 billion being taken out of these funds since April 24. (Data sources: Farside Investors and CoinGlass)

On Wednesday, Fidelity’s FBTC took the lead in withdrawals, resulting in a loss of $191.1 million. This development may raise concerns among bulls, as FBTC and BlackRock’s IBIT had previously drawn significant funds during the first quarter, offsetting the frequent large outflows from the pricier Grayscale ETF (GBTC). In simpler terms, more money was added to FBTC and IBIT than taken out of GBTC in the initial three months of the year.

U.S. Bitcoin ETFs Bleed Record $563M Even as Fed's Powell Rules Out Rate Hike

On Wednesday, the Grayscale Bitcoin Trust (GBTC) experienced its second-largest outflow of approximately $167.4 million. Following closely were ARK Bitcoin ETF (ARKB) with an outflow of around $98.1 million and Ibis Innovative Technologies ETF (IBIT) with an outflow of about $36.9 million. Other funds also saw significant withdrawals, despite the relatively dovish stance taken by Federal Reserve Chair Jerome Powell that provided some support to risk assets like bitcoin. In a dovish stance, the central bank prioritizes job creation and economic expansion over tightening liquidity excessively.

The Federal Reserve announced on Wednesday that it would maintain its benchmark interest rate at the range of 5.25% to 5.5%, as anticipated by many. In the subsequent press conference, Chair Powell expressed his belief that the economy is robust enough not to necessitate a rate reduction. He also rebuffed concerns about potential upcoming rate increases or tightening of liquidity triggered by recent underperforming inflation data.

The Federal Reserve intends to substantially scale back its quantitative tightening (QT) initiative, which is an alternate form of monetary tightening, starting in June. Simultaneously, the U.S. Treasury unveiled a new plan to purchase large amounts of government debt for the first time in more than two decades with the goal of enhancing liquidity within the bond market.

Just as other risk assets are affected by anticipated shifts in liquidity, bitcoin experienced a short-term surge from $56,620 to $59,430 in response to Powell’s remarks. At the same time, the rates on the 10-year and 2-year US Treasury bonds decreased, as did the dollar index.

Bitcoin’s rebound was brief, as it dropped to $57,300 by press time. This week, the first bitcoin and ether (ETH) spot ETFs were introduced in Hong Kong, but they received lackluster trading volumes, adding to the crypto market’s pessimistic atmosphere.

2024-05-02 08:47

U.S. Bitcoin ETFs Bleed Record $563M Even as Fed’s Powell Rules Out Rate Hike

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