- Spot Bitcoin ETFs in the United States experienced their worst day on record Wednesday, with over half a billion dollars in net outflows for the first time since their January debut.
- As Bitcoin’s price fell to its lowest point in two months, spot Bitcoin ETFs saw $563 million in net outflows, far exceeding a previous record of $326 million in daily net outflows seen in mid-March.
- The outsized bleed from Bitcoin funds came as the Federal Reserve affirmed that its fight against inflation is likely far from over.
Spot Bitcoin ETFs in the United States undergo their worst day on record, with over half a billion dollars in net outflows, amidst a drop in Bitcoin’s price.
Federal Reserve’s Stance on Inflation
The U.S. central bank kept interest rates fixed at their highest levels in over 23 years following its May policy meeting. Despite this, Fed Chair Jerome Powell stated that tighter monetary policy that could weigh on risk assets like stocks and crypto was “unlikely” to be next. Following his remarks, Bitcoin climbed to $58,500, yet it remains down 8% over the past week.
Outflows from Major Bitcoin Funds
As the selloff materialized Wednesday, BlackRock’s spot Bitcoin ETF saw outflows for the first time. Amassing $15.4 billion uninterrupted since its Wall Street launch, the iShare Bitcoin Trust (IBIT) saw outflows of $37 million. At the same time, Grayscale’s Bitcoin Trust (GBTC), which has seen over $17 billion in cumulative outflows since January, didn’t hemorrhage the most cash Wednesday. Instead, holders of Fidelity’s spot Bitcoin ETF led the selloff, which saw $191 million leave the fund as GBTC witnessed outflows of $167 million.
Potential Impact of Spot Bitcoin ETFs
Spot Bitcoin ETFs have the potential to “amplify market downturns,” analysts from crypto analytics firm Kaiko wrote in a report released alongside Moody’s Wednesday. “If there is an event that triggers large outflows, ETF issuers will need to liquidate their holdings, which could weaken values in crypto markets,” it stated.
Conclusion
Despite the record outflows, the price of Bitcoin is still up 33% year-to-date, partially due to the supply and demand dynamics ushered in by the products. However, if Bitcoin’s “correction worsens,” Bloomberg Senior ETF Analyst Eric Balchunas said the ETFs’ AUM could drop 10%—and he “wouldn’t be surprised.”
