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In summary
- Investors withdrew $319 million from Bitcoin exchange-traded funds (ETFs) last week, while Bitcoin short investment products received $4.4 million.
- BlackRock, the world’s largest asset manager, was the only fund manager to buck the trend, with inflows of more than $219 million into its iShares ETF.
- CoinShares attributed the negative sentiment to strong US economic data, which lowered the likelihood of a 50 basis point interest rate cut.
Investors rushed to withdraw cash from Bitcoin exchange-traded funds (ETFs) last week as the number of people betting that the price of the largest digital Cryptocurrency would fall skyrocketed.
A total of $319 million flowed out of funds from Fidelity, ARK Invest and other Wall Street heavyweights that give investors exposure to Bitcoin, asset manager CoinShares reported Monday. It added that Bitcoin short investment products (i.e. products used to bet that the price of Bitcoin will fall) received $4.4 million, the highest figure since March.
BlackRock, the world’s largest asset manager and the leading issuer of Bitcoin ETFs, was the only fund manager to buck the trend, with inflows of more than $219 million into its iShares ETF during the week.
CoinShares, which saw $4 million in outflows from its Bitcoin funds last week, said the reason for the mostly negative sentiment was the release of strong economic data coming out of the US. “We believe this was driven by stronger than expected economic data in the US, which has decreased the likelihood of a 50 basis point interest rate cut,” the report said.
He added that, in general, cryptocurrencies will become “increasingly sensitive” to interest rate expectations.
Investors have been waiting for the Federal Reserve to cut interest rates since the central bank raised them to their highest level in two decades in 2022.
The Federal Reserve is now expected to cut rates this month after central bank Chairman Jerome Powell said in August that a policy shift was imminent.
Cryptocurrency markets, like U.S. stocks, are “risky” assets, meaning they are more prone to price fluctuations than other investments. A high-interest rate environment may make them less attractive to investors, as holding cash in safer, yield-generating accounts becomes more preferable.
On Friday, the Commerce Department reported that the personal consumption expenditures price index rose 0.2% for the month and 2.5% from the same period last year, as analysts had expected. But markets broadly interpreted the data as less likely to push the Fed toward a quarter-point interest rate cut rather than a half-point.
The CoinShares report added that investors in Europe also pulled funds out of cryptocurrencies. Investment vehicles offering exposure to Ethereum, the second-largest cryptocurrency by market cap, also lost a total of $5.7 million. Ethereum ETFs in the US were approved by the Securities and Exchange Commission in May.
Bitcoin is currently trading at $58,622 after falling more than 7% in seven days, according to data from CoinGecko. The asset is 20% below its all-time high of $73,737, which it hit in March following the long-awaited approval of Bitcoin ETFs in the US market.
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