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Crypto

BTC Stabilizes at $58K, ETF Outflows Hit $564M Amid Fed Hold

Bitcoin Stabilizes at $58K After Fed Holds Rates; ETF Outflows Hit $563.7M Amid Market Uncertainty

By Athena Xu

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5/2, 08:52 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • BTC stabilized around $58K after the Fed kept interest rates unchanged, despite a previous drop to $56.5K and significant ETF outflows.
  • U.S. spot Bitcoin ETFs experienced a record daily outflow of $563.7 million, led by Fidelity’s FBTC and Grayscale's GBTC.
  • BlackRock anticipates new inflows into Bitcoin ETFs from sovereign wealth funds, pension funds, and endowments in the coming months.

Bitcoin's Volatile Week

Bitcoin experienced a tumultuous week, with its value stabilizing around the $58,000 mark following the U.S. Federal Reserve's decision to keep the benchmark interest rate unchanged. This decision came amidst Chair Powell's remarks on the economy's strength and the dismissal of rate cuts despite disappointing inflation figures. Bitcoin's journey saw it losing the crucial $60,000 support level, dipping as low as $56,500, before making a modest recovery to $58,282, marking a 1.4% increase over 24 hours. The broader digital asset market, as indicated by the CoinDesk 20 Index (CD20), witnessed a 4% uplift, led by altcoins such as SOL and AVAX, which bounced back from Wednesday's downturn.

ETF Outflows and Market Liquidity

The market observed significant outflows from 11 spot bitcoin ETFs, totaling $563.7 million, marking the highest daily figure since their listing in January. Fidelity’s FBTC and Grayscale's GBTC were at the forefront of these outflows, with $191.1 million and $167.4 million withdrawn, respectively. These movements underscore Bitcoin's sensitivity to liquidity changes, highlighted by a brief rally following the Fed's announcement to scale back quantitative tightening measures and initiate a government debt buyback program. Despite this, the ETF outflows persisted, reflecting broader market uncertainties and liquidity concerns.

Institutional Interest and Future Inflows

Robert Mitchnick, BlackRock's head of digital assets, anticipates a new wave of institutional investments into bitcoin ETFs from sovereign wealth funds, pension funds, and endowments. This shift is attributed to a renewed discussion around Bitcoin's role in portfolio construction, suggesting a potential surge in demand for ETF exposure among these institutions. BlackRock's ongoing conversations with such entities hint at a significant, untapped appetite for Bitcoin investment, poised to influence market dynamics in the coming months.

Market Sentiments and Regulatory Outlook

The crypto market's recent downturn, with Bitcoin falling below $57,000 ahead of the Fed's interest rate decision, reflects broader market apprehensions and a cautious stance from investors. Standard Chartered’s Geoff Kendrick highlighted the impact of consecutive ETF outflows and a challenging macroeconomic environment on Bitcoin's price trajectory. The mixed reactions to the launch of spot bitcoin ETFs in Hong Kong further underscore the complex interplay between market liquidity, regulatory developments, and investor sentiment. The sentencing of Binance's former CEO, Changpeng Zhao, over money laundering charges adds another layer of caution to the market's outlook.

Street Views

  • Robert Mitchnick, BlackRock (Bullish on Bitcoin ETFs):

    "The coming months will see sovereign wealth funds, pension funds and endowments start to trade in the spot ETFs... there could be a lot of pent-up demand for exposure via the ETFs."