ETFs
Bitcoin ETFs Cool Down as Crypto Funds Post Biggest Losses Since March
The Federal Reserve’s hawkish stance last week apparently reduced institutional investors’ confidence in the markets, as total outflows from all crypto exchange-traded products (ETPs) last week amounted to 600 million dollars. This makes last week the worst release of crypto ETPs, including ETFs, since March.
Investors appear to have lost confidence because of the dot plot, a set of forecasts from Fed chairs and governors. The chart now indicates that the Federal Reserve plans only one rate cut in 2024, not three as it had predicted at the start of the year, according to the report.
High interest rates are detrimental to risky assets like cryptocurrencies and stocks, because fixed-income, yield-producing assets like Treasuries offer investors a place to store their funds safely.
Bitcoin ETFs in particular saw net outflows of $621 million, while Ethereum, XRP, and Lido ETPs saw net inflows of $15 million, $2 million, and $1 million, respectively.
Overall, this is a huge drop from the more than 2 billion dollars in entries seen the previous week. This was the best week for crypto ETP flows since March, and now it is immediately followed by the worst during the same period.
Exchange-traded products (ETPs) are a broad spectrum that includes exchange-traded funds (ETFs) and exchange-traded notes (ETNs). ETFs are very popular in both the cryptocurrency and traditional financial markets.
U.S. ETPs saw the highest net outflows of $565 million, while Germany bucked the trend with $17 million in net inflows.
Grayscale’s GBTC fund saw the highest outflow of $274 million, while Ark Invest and 21Shares’ ARKB fund saw an outflow of almost $150 million.
BlackRock’s IBIT fund saw the highest inflow of $41.6 million. ProShares’ EETH fund, which invests in Ethereum futures, saw the second highest inflow at $16.85 million.
Last week, Bitcoin and the broader crypto ecosystem witnessed increased volatility. Asset prices rose after a better-than-expected Consumer Price Index (CPI), but the rally was short-lived as Fed Chairman Jerome Powell’s hawkish comments eroded gains in space of a few hours.
But the outflows and sometimes volatile prices have been used by some as an opportunity to buy Bitcoin while it is “on sale.”
MicroStrategy, which planned to raise 500 million dollars of senior unsecured convertible notes on June 13, announced Friday that it had increased its increase to up to $786 million. The funds will largely be used to purchase Bitcoin.
Meanwhile, global investment firm Bernstein raised its 2025 price target for Bitcoin to $200,000 from $150,000.
Edited by Andrew Hayward
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.