U.S.-Based Bitcoin ETFs Experience Record Outflows Amid Fed Chair's Remarks

Investors rapidly divested from U.S.-based spot bitcoin exchange-traded funds (ETFs) on Wednesday, marking the largest net outflow of $563.7 million since their inception in January.

Despite Federal Reserve Chairman Jerome Powell's dismissal of rate hike prospects, 11 ETFs recorded a significant decline, extending a five-day losing streak and totaling nearly $1.2 billion in outflows since April 24.

Fidelity's FBTC ETF spearheaded the outflows on Wednesday, with withdrawals amounting to $191.1 million. This trend contrasts with the first quarter when FBTC and BlackRock's IBIT consistently attracted funds, overshadowing the outflows from the Grayscale ETF (GBTC). GBTC witnessed the second-largest outflow of $167.4 million, followed by ARKB's $98.1 million and IBIT's $36.9 million.

While the Federal Reserve maintained the benchmark interest rate between 5.25% and 5.5%, Powell's net-dovish approach supported risk assets, including bitcoin. Powell emphasized the strength of the economy, dispelling concerns of renewed rate hikes despite disappointing inflation figures. The Fed also announced plans to curtail its quantitative tightening (QT) program starting June, while the U.S. Treasury initiated a bond buyback program to enhance liquidity.

Bitcoin initially rallied from $56,620 to $59,430 following Powell's comments, reflecting sensitivity to liquidity expectations. However, the bounce was short-lived, with bitcoin retreating to $57,300 amid the launch of Asia's first spot bitcoin and ether (ETH) ETFs in Hong Kong, which received lacklustre volumes, dampening sentiment in the crypto market.

Key Takeaways

• U.S. bitcoin ETFs witnessed a record outflow of $563.7 million on Wednesday, marking the largest withdrawal since their launch in January.
• Despite Federal Reserve chairman Jerome Powell's dovish comments and the Fed's decision to keep interest rates unchanged, investors remained cautious, leading to a brief rally in bitcoin prices followed by a retreat to $57,300.
• Fidelity's FBTC recorded the largest outflow, signaling a shift in investor sentiment towards bitcoin ETFs despite previous strong inflows in the first quarter.
• Powell's remarks on the economy and liquidity tightening, coupled with disappointing volumes for Asia's first spot bitcoin and ether ETFs, contributed to market uncertainty and volatility in the cryptocurrency space.