The cryptocurrency market experienced a significant shift last week, as U.S. spot Bitcoin exchange-traded funds (ETFs) saw a combined $580.6 million in net outflows, marking the first time in five weeks that the funds have witnessed such a trend. According to CoinShares, the leading digital asset investment firm, this change was largely attributed to a “more hawkish-than-expected FOMC meeting.”
Outflows and Inflows
The outflows were led by Grayscale’s converted GBTC ETF, which saw $274.3 million exiting the higher-fee fund. Ark Invest’s ARKB and Fidelity’s FBTC also registered significant outflows, with $149.7 million and $146.3 million, respectively. BlackRock’s IBIT was the only fund to generate net inflows last week, attracting $41.6 million.
Hawkish FOMC Meeting
The outflows were largely driven by the Federal Reserve’s more hawkish-than-expected stance during its FOMC meeting. The central bank held interest rates at 5.5% and indicated that only one rate cut was coming in 2024 amid persistent inflationary pressures. This prompted investors to scale back their exposure to fixed-supply assets, such as Bitcoin.
Global Crypto Asset Flows
The global digital asset investment products also registered $600 million in net outflows last week, the largest since March 22, according to CoinShares’ latest report. The outflows were entirely focused on Bitcoin, which saw $621 million in outflows, while short-Bitcoin positions saw $1.8 million in inflows.
Ether Products Bucking the Trend
While Bitcoin-based investment products experienced outflows, ether-based investment products bucked the trend, witnessing $13 million in net inflows last week globally. This suggests that investors may be diversifying their crypto portfolios, seeking exposure to alternative assets like Ethereum.
Spot Ethereum ETFs on the Horizon
The U.S. Securities and Exchange Commission (SEC) has approved 19b-4 forms for eight spot Ethereum ETFs from firms like BlackRock and Fidelity. However, the issuers still need to have their S-1 registration statements go effective before trading can begin, a process that could take weeks. The SEC Chair, Gary Gensler, has estimated that the S-1 approvals for spot Ethereum ETFs could occur sometime by the end of this summer.
“Hearing the [SEC] staff sent issuers comments on S-1s today, and they’re pretty light, nothing major, asking for them back in a week. Decent chance they work to declare them effective the next week and get it off their plate before the holiday weekend. Anything is possible but this is our best guess as of now,” said Bloomberg ETF analysts Eric Balchunas and James Seyffart.
The cryptocurrency market remains volatile, with investors closely monitoring the developments in the regulatory landscape and the impact of macroeconomic factors on the industry.
