The decision by the Federal Reserve not to decrease interest rates had far-reaching consequences, particularly impacting US spot Bitcoin exchange-traded funds (ETFs), which experienced their largest single-day outflow on record. This outflow, totaling over half a billion dollars ($563.7 million), was a clear response from investors concerned about the implications of the Fed’s stance on interest rates for the cryptocurrency market.
Data from CoinGlass, an analysis platform, revealed that since April 24, there had been approximately $1.2 billion in outflows from spot Bitcoin ETFs. This trend signaled a significant shift in investor sentiment, with many opting to divest from these ETFs in light of the Federal Reserve’s decision. Among the ETFs affected, Fidelity’s FBTC suffered the largest outflow, losing $191.1 million, followed by Grayscale’s GBTC with $167.4 million, ARK’s ARKB with $98.1 million, and BlackRock’s IBIT with $36.9 million.
During the subsequent press conference, Federal Reserve Chair Jerome Powell highlighted concerns about persistently high inflation levels and the uncertainty surrounding future inflation trends. This cautious stance, coupled with the Fed’s decision to curtail its quantitative tightening (QT) program starting in June and the US Treasury’s announcement of a debt buyback program, contributed to increased market volatility and investor apprehension.
In response to Powell’s comments, the price of Bitcoin initially rallied from $56,620 to $59,430. However, this upward momentum proved short-lived, and Bitcoin subsequently retreated to $57,300 before stabilizing around $57,800 at the time of writing. In contrast, traditional stock indexes in the US performed relatively well, with the S&P 500 rising by 0.8%, the Nasdaq Composite increasing by 1%, and the Dow adding more than 450 points, or 1.2%.
Furthermore, the disappointing debut of Asia’s first spot bitcoin and ether ETFs in Hong Kong earlier in the week likely exacerbated negative sentiment in the crypto market. This, combined with ongoing regulatory uncertainty and concerns about the long-term viability of digital assets, prompted institutional investors to reassess their exposure to Bitcoin, contributing to heightened volatility in the market.
Overall, the record outflows from US Bitcoin ETFs underscored the significant impact of central bank decisions and regulatory developments on the cryptocurrency market. As market participants navigate evolving macroeconomic conditions and regulatory landscapes, the cryptocurrency market is likely to experience continued volatility in the near term.