Last week, investors rapidly withdrew funds from Bitcoin exchange-traded funds (ETFs), reflecting a significant shift in market appetite.
The move coincided with an increase in the number of traders betting on a decline in Bitcoin’s price, as reported by asset management firm CoinShares.
A substantial $319 million was pulled from Bitcoin ETFs managed by major players like Fidelity, ARK Invest, and other prominent Wall Street firms, according to the CoinShares report released on Monday.
This marks a considerable outflow, highlighting the growing caution among investors. Meanwhile, short Bitcoin investment products—designed for those anticipating a drop in Bitcoin’s value—attracted $4.4 million, the highest weekly inflow since March.
Notably, BlackRock, the world’s largest asset manager and a leading issuer of Bitcoin ETFs, stood out by going against the trend. Its iShares ETF saw an inflow of over $219 million, signaling continued confidence from its investor base.
CoinShares, which itself saw $4 million withdrawn from its Bitcoin funds, attributed the overall negative sentiment to strong U.S. economic data. “We believe this was driven by stronger-than-expected economic data in the U.S., which has reduced the likelihood of a 50-basis point interest rate cut,” the report stated.
The report further noted that cryptocurrencies are likely to become “increasingly sensitive” to changes in interest rate expectations. Investors have been anticipating a reduction in interest rates by the Federal Reserve after rates were pushed to a two-decade high in 2022. The Fed’s Chair, Jerome Powell, hinted in August that a policy shift was on the horizon, raising expectations for a rate cut this month.
Crypto markets, like U.S. equities, are considered “risk-on” assets, making them susceptible to greater volatility compared to other investments. In a high-interest rate environment, these assets often become less attractive as investors turn to safer, yield-bearing accounts.
It is worth noting that in contrast to the relatively moderate outflows from Bitcoin ETFs, Solana, the fifth-largest cryptocurrency by market capitalization, experienced record-setting withdrawals. According to CoinShares, $39 million was pulled from Solana funds, marking the largest weekly outflow on record for the asset.
The CoinShares report also highlighted that European investors were similarly cautious, with crypto funds across the continent experiencing significant outflows. Ethereum, the second-largest cryptocurrency by market cap, saw a total outflow of $5.7 million from its investment vehicles. Ethereum ETFs were approved by the U.S. Securities and Exchange Commission earlier this year, adding to its mainstream appeal.
As of the latest data from CoinGecko, Bitcoin’s price stands at $59,209 per coin, down more than 7% over the past week and about 20% below its all-time high of $73,737 reached in March following the approval of Bitcoin ETFs in the U.S. market.
