Spot Bitcoin ETFs See $200M Outflows as Inflation Data Looms

Jimmy Aki
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Data from SoSo Value reveals that US spot Bitcoin ETFs experienced a massive daily outflow of over $200 million on June 11, as market participants anxiously await the May Consumer Price Index (CPI) data later today.

Massive Outflows from Spot Bitcoin ETFs

The sell-off was led by the Grayscale Bitcoin Trust (GBTC) and ARK 21Shares Bitcoin ETF (ARKB). Both funds saw outflows of $121 million and $56 million, respectively.

In contrast, BlackRock’s iShares Bitcoin Trust (IBIT) recorded zero withdrawals during the same period. The Bitcoin ETF withdrawals mark a notable reversal from the positive inflows these funds had been enjoying since they were approved in January.

The market volatility surrounding the CPI report is duly expected, as the outcome has always impacted the Federal Reserve’s monetary policy stance and the trajectory of volatile assets like Bitcoin.

While some analysts believe a cooler-than-expected inflation reading could extend the ongoing market rally by raising hopes of an imminent rate cut, others warn that a surprisingly strong inflation print could trigger market turmoil and delay rate cut expectations.

The path forward for inflation and market performance remains complicated due to conflicting economic indicators. The US labor market showed strength in May with 272,000 new jobs and 4.1% wage growth, but the unemployment rate also rose to 4%, creating mixed signals for inflation and market outlook.

Rising unemployment alongside job creation and wage growth has created a paradox. This has made it harder for market participants to predict inflation and asset price trends.

Matthew Dixon, CEO of crypto rating platform Evai, acknowledged the genuine risk of higher inflation, which would benefit the dollar but negatively impact risk assets like Bitcoin.

However, he also left room for the possibility of subsiding CPI and a dovish Fed stance, which could boost risk assets.

Historical Patterns Offer Hope

Notably, Bitcoin’s price has historically rebounded after Federal Open Market Committee (FOMC) announcements, despite initial volatility.
Pseudonymous crypto researcher Gumshoe observed this pattern, stating that the market tends to “price in overly bearish statements and then reverses” on FOMC days.

This phenomenon was also evident in April, when investors withdrew a net $218 million from US bitcoin exchange-traded funds (ETFs), marking one of the worst daily outflows.

The mass exodus of investment was driven by waning demand for risky investments as hopes for Federal Reserve interest rate cuts faded.

The outflow included a $23 million drawdown from the Fidelity Wise Origin Bitcoin Fund, the first since its launch in January, alongside withdrawals from BlackRock Inc’s iShares Bitcoin Trust.

While these ETFs initially broke records, amassing combined assets of around $54 billion, demand has slowed in recent weeks due to US inflation data pointing to higher-for-longer borrowing costs, boosting Treasury yields – an unfavorable backdrop for speculative investments like crypto.

As Noelle Acheson, author of the Crypto Is Macro Now newsletter, stated, “Bottom line, we can expect BTC to take a breather as long as the macro mood continues to support higher yields.”

Despite this temporary setback, the advent of these ETFs is still considered a positive development for the industry, as Acheson explained,

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.