U.S. Bitcoin ETFs See Historic $563M Exodus Despite Fed’s Hold on Rate Hike

Investors made a notable exit from U.S.-based spot bitcoin exchange-traded funds (ETFs) on Wednesday, recording the swiftest outflow to date, even as Federal Reserve Chair Jerome Powell dismissed any immediate plans for a rate hike. The 11 ETFs witnessed a combined net outflow of $563.7 million, marking the largest exodus since their inception on January 11. This extended a five-day streak of losses, with investors pulling nearly $1.2 billion from these funds since April 24, according to data from Farside Investors and CoinGlass. Fidelity’s FBTC saw the most significant outflows on Wednesday, totaling $191.1 million in withdrawals. This development raises concerns for bullish sentiment, especially considering that FBTC and BlackRock’s IBIT consistently attracted funds in the first quarter, offsetting the regular substantial outflows from the relatively more expensive Grayscale ETF (GBTC).

On Wednesday, GBTC experienced the second-largest outflow, totaling $167.4 million, followed by ARKB’s $98.1 million and IBIT’s $36.9 million. Despite Powell’s stance maintaining a floor under risk assets, including bitcoin, other funds also experienced outflows. Powell’s net-dovish approach, favoring economic growth and employment over excessive liquidity tightening, came amid fears of renewed rate hikes or liquidity tightening sparked by recent disappointing inflation data. As expected, the Fed kept the benchmark interest rate unchanged between 5.25% and 5.5% during Wednesday’s meeting. Powell emphasized the economy’s robustness, signaling no intention to cut rates while addressing concerns about potential rate hikes or liquidity tightening. The Fed also announced plans to significantly reduce its alternate liquidity-tightening program, quantitative tightening (QT), starting in June. Concurrently, the U.S. Treasury unveiled a program to repurchase billions of dollars in government debts for the first time in over two decades to enhance liquidity in the bond market. Bitcoin, like other risk assets, is sensitive to anticipated shifts in liquidity conditions. Following Powell’s remarks, bitcoin briefly rallied from $56,620 to $59,430. However, the bounce was short-lived, with bitcoin retreating to $57,300. Earlier in the week, the debut of Asia’s first spot bitcoin and ether (ETH) ETFs in Hong Kong yielded disappointing volumes, further dampening sentiment in the crypto market.