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Bitcoin ETF Outflows Showcase Risk-Off Approach as U.S. Inflation Figures Expected

Last Updated 2 days ago
Giuseppe Ciccomascolo
Last Updated 2 days ago

Key Takeaways

  • After a record 19 days of inflow, US spot Bitcoin ETFs experienced their first net outflow day on June 10. 
  • Traders will make their moves after the US inflation and Federal Reserve meetings on Wednesday.
  • As a rate cut is out of discussion now, market expects Fed’s policy to impact Bitcoin ETFs investments.

After a record-breaking run of investor interest, US spot Bitcoin exchange-traded funds (ETFs) experienced their first net outflows in four weeks. This shift comes as the Federal Reserve prepares to meet this week, with inflation data and potential interest rate adjustments in focus.

While the Fed’s policy statement will be closely watched, the true market mover could be the upcoming consumer price index (CPI) data. This data will heavily influence the bank’s decision on interest rates, which in turn could significantly impact investments in ETFs, including Bitcoin ones.

Bitcoin ETFs Register Outflow

A four-week run of positive inflows for US spot Bitcoin ETFs came to an abrupt halt on June 10th, according to Farside Investors’ data . The total net outflow for the day was $64.9 million.

Grayscale Bitcoin Trust (GBTC), the largest such ETF, bore the brunt of the withdrawals, experiencing $39.5 million in outflows. Other notable outflows included Invesco Galaxy Bitcoin ETF (BTCO) at $20.5 million, Valkyrie Bitcoin Fund (BRRR) at $15.8 million, and Fidelity Wise Origin Bitcoin Fund (FBTC) at $3 million.

Bitcoin ETF flow table
Bitcoin ETF flow table. l Source: Farside Investors

However, there were a few bright spots. Bitwise Bitcoin ETF (BITB) and iShares Bitcoin Trust (IBIT) defied the trend, attracting inflows of $7.6 million and $6.3 million, respectively.

This reversal comes after a record-breaking 19-day stretch of inflows, ending last Friday. During that period, spot Bitcoin ETFs collectively saw a staggering $4 billion flow into their coffers. Since their debut in January, these 11 ETFs have amassed a total of $15.62 billion in net inflows.

Traders Await US Inflation Data

The Federal Reserve meets this week, and their statement could hinge on recent progress in combating inflation. A positive outlook might signal future interest rate cuts, a welcome relief for borrowers. However, there’s a twist: the key data point – the latest US inflation numbers – won’t be available until after the first day of their discussions.

This timing creates some uncertainty. Officials might wait for the Wednesday morning inflation release before solidifying their stance. Inflation stubbornly remained high in the first quarter, dashing hopes for a smooth decline like the latter half of 2023.

There’s a glimmer of hope though. April saw inflation dip slightly to 3.4%, aligning with market expectations . This suggests some progress, but the Fed will be looking for a sustained downward trend.

Looking ahead, market expectations for inflation seem cautiously optimistic. Data  from the Federal Reserve Bank of St. Louis indicates a five-year inflation expectation of 2.35%, which is a healthy target for the Fed. Interestingly, the 5-year breakeven inflation rate, another particularly monitored market metric, sits at a similar level of 2.27%. This suggests some stability in inflation expectations.

What To Expect

Economists are skeptical about near-term rate cuts by the Federal Reserve, despite any potential changes in their official statement on Wednesday. Chair Powell is anticipated to reiterate the need for sustained low inflation  before considering such a move.

While a stalling economy with significant layoffs could prompt earlier cuts, strong May jobs data has dampened Wall Street’s expectations, revising their forecast from two cuts this year to just one.

This raises the question: how will this impact Bitcoin ETFs? Crypto assets seem to benefit from a dovish Fed stance, as Fundstrat’s Tom Couture observed . Despite recent struggles with the $70,000 mark, optimism persists due to inflows into US ETFs and potential regulatory clarity from Washington.

Galaxy Digital’s Michael Novogratz echoes this sentiment, expressing hope  for a more crypto-friendly US policy landscape. He even predicted a possible Bitcoin price surge to a record-breaking $100,000 by year-end.

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