With market expectations shifting for potential interest rate cuts by the Federal Reserve (Fed) in 2025, a record $680 million was withdrawn from Bitcoin ETFs on Thursday. This marks the highest outflow in a single day since the approval of these investment funds back in January.
Grayscale And Bitwise Bitcoin ETFs Experience 8% Decline
The outflow from Bitcoin ETFs coincided with a 5% drop in the price of Bitcoin, settling around $97,400 by the end of the week. This downward trend aligns with a broader decline in risk assets triggered by the Fed’s revised economic projections released earlier.
The Fed now anticipates only two quarter-point rate cuts in the upcoming year, a significant reduction from the four cuts previously expected at the September meeting.
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Notable Bitcoin ETFs like Grayscale’s Bitcoin Trust and Bitwise’s Bitcoin ETF have seen declines of around 8% following the Fed’s updated guidance. Bitcoin itself has also experienced a 9% decrease within the same timeframe.
Thursday’s outflows broke a streak of 15 consecutive days of inflows for the twelve US Bitcoin ETFs, resulting in a net inflow of approximately $5.3 billion during that period.
After reaching a record high of just over $108,000 earlier in the week, Bitcoin fell below the $100,000 mark on Thursday, briefly dropping to $92,000 before recovering to around $100,000.
The bearish sentiment in the markets can be attributed to the Fed’s cautious stance as well as seasonal profit-taking among institutional investors in Bitcoin ETFs.
Analysts Warn Of Continued Crypto Sell-Off
The recent sell-off may further impact market sentiment, as noted by Joseph Dahrieh, managing principal at Tickmill. He stated, “This decline could weigh heavily on the cryptocurrency and broader market sentiment, especially as Bitcoin fell below the $100,000 mark, indicating potential short-term volatility and downside risks.”
The volatility has been heightened by significant liquidations in both long and short positions, totaling over $240 million within a 24-hour period. Antonio Di Giacomo, a senior market analyst at XS.com, mentioned, “The Federal Reserve’s cautious stance signaling fewer cuts for 2025 has created an atmosphere of uncertainty and speculation.”
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Looking ahead, the sell-off in the cryptocurrency market may continue in the near term. Alex Kuptsikevich, chief market analyst at FxPro, speculated that the total market capitalization of cryptocurrencies could drop below $3 trillion from a peak of $3.7 trillion earlier this month.
He cautioned that “a failure below $94,500 would signal a break of the uptrend of the last six weeks, while a fall below $92,000 would bring the price below the 50-day moving average. In this scenario, time favors the bears.”
As of the latest update, Bitcoin has managed to stabilize above $97,400 as the week concludes, despite registering a 4% loss over the past 24 hours.
Featured image from DALL-E, chart from TradingView.com