Bitcoin ETFs Influence Grows Amid $564M Outflow, Hits $62,937

Key Takeaway

• Bitcoin's price surged 7% to $62,937 after a US employment report, showing ETFs' growing influence on its market dynamics.
• A net $564 million was pulled from US Bitcoin ETFs in the largest drawdown since their January debut, amid rate hike concerns.
• The correlation between Bitcoin and traditional risk assets is becoming more evident, aligning with conventional investment perspectives.

Bitcoin's Conventional Shift

Bitcoin's recent price movements suggest a growing alignment with traditional investment logic, particularly following the introduction of U.S. exchange-traded funds (ETFs) that have opened the digital asset market to Wall Street in unprecedented ways. The cryptocurrency experienced a significant surge, jumping around 7% to $62,937 on Friday after a U.S. employment report indicated a smaller-than-expected increase, renewing hopes for interest rate cuts and boosting the appeal of speculative assets like Bitcoin. This rally was a recovery from earlier losses in the week, which were driven by concerns over a more hawkish Federal Reserve and waning demand for Bitcoin ETFs. Stéphane Ouellette, CEO of FRNT Financial, highlighted the newfound correlation between Bitcoin and traditional risk assets, a departure from its previously uncorrelated behavior.

ETF Outflows Amid Rate Hike Concerns

The landscape for Bitcoin ETFs experienced a significant shift, with investors pulling a net $564 million from nearly a dozen U.S. ETFs on Wednesday, marking the largest drawdown since these products debuted in January. This outflow was part of a broader reaction to the prospect of enduring high interest rates, which also impacted other markets, including equities. Notably, BlackRock's iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund saw substantial outflows, with $36.9 million and $191.1 million leaving the funds, respectively. This trend was alarming to bulls, especially since these funds had previously seen consistent inflows.

Federal Reserve's Stance and Market Reaction

Despite the outflows and market volatility, the Federal Reserve's recent announcements have had a mixed impact on Bitcoin and the broader crypto market. The Fed decided to keep the benchmark interest rate unchanged, with Chair Jerome Powell indicating the economy's strength precludes immediate rate cuts. However, the Fed also announced a reduction in its quantitative tightening program and a U.S. Treasury plan to buy back government debt, aiming to improve liquidity in the bond market. These measures led to a brief rally in Bitcoin, although the gains were short-lived, highlighting the cryptocurrency's sensitivity to changes in liquidity conditions.

Street Views

• Stéphane Ouellette, FRNT Financial (Neutral on Bitcoin):

  "What this week has taught us is that Bitcoin at all-time-high and the new development of Bitcoin ETFs basically open Wall Street’s participation into the Bitcoin market in a way we’ve never seen before. Before, there weren’t any obvious correlations with other asset classes, and it was very obvious that this week, particularly on the Tuesday night sell-off ahead of the Fed that Bitcoin was trading in line with other risk assets."

• Youwei Yang, BIT Mining Ltd (Cautiously Optimistic on Bitcoin):

  "The drop in Bitcoin from the record of almost $74,000 reached in March showed some worry by traders who may see some risk in the global macro environment that the Fed or general investors are not seeing yet."