Massive Outflows Continue for Spot Bitcoin ETFs After FOMC Meeting
Spot Bitcoin exchange-traded funds (ETFs) listed in the U.S. have been experiencing significant outflows, with a total net outflow of $726 million since the Federal Open Market Committee (FOMC) meeting.
On June 17 alone, spot Bitcoin ETFs saw outflows of $146 million, according to data from Sosovalue.
Leading this trend is Fidelity’s Bitcoin ETF (FBTC), which is often considered a major player in the ETF market. It experienced $92 million in outflows. ARK Invest’s ARK Next Generation Internet ETF (ARKB) also saw $50 million in outflows. This is a continuation of a broader trend, with net outflows recorded in five of the last six days.
Impact of the FOMC Meeting and Context
This recent wave of outflows comes after the latest FOMC meeting, indicating investor reactions to broader economic signals and monetary policy adjustments.
During the June 11 FOMC meeting, the federal funds rate was left unchanged in the range of 5.25% to 5.50%. This decision aligns with the Fed’s ongoing strategy to combat inflation, which, although showing signs of improvement, remains above the target level of 2%. The recent outflows from spot Bitcoin ETFs suggest growing caution among investors, potentially influenced by the central bank’s stance on interest rates.
The outflows may also indicate that institutional investors, who primarily favor BlackRock and Fidelity’s ETF products, are re-evaluating their risk exposure in the current market climate.
Reasons for Changes in Investor Sentiment
The significant outflows from spot Bitcoin ETFs can be attributed to a combination of factors, including uncertainty in monetary policy and profit-taking.
The FOMC’s recent decisions and statements have introduced a level of uncertainty into the markets. With hints of future interest rate hikes and ongoing concerns about inflation, investors may be choosing to reduce risk in their portfolios.
The consistent outflows over the past six days suggest a shift in investor sentiment and strategy, possibly towards safer assets or cash holdings amid economic uncertainties. Sudden movements and outflows are common in the volatile crypto market and could reverse just as quickly if market conditions stabilize or improve.
As the market continues to analyze the implications of the FOMC meeting and other economic indicators, the crypto market may experience continued volatility.
Jag Kooner, Head of Derivatives at Bitfinex, stated, “Last week, we broke a streak of 20 consecutive days of inflows and we have now had consecutive outflows for the past three trading days with over $550 million in outflows last week and $146 million in outflows on the first day of the current trading week.”
Kooner attributed the outflows to a couple of reasons, explaining that ETF investors lack conviction and are selling below their cost basis.
“This is a pattern among ETF investors, where they seem to magnify market moves, as we saw a similar dynamic when there were net inflows in late April of over $1 billion when BTC range highs were above $70,000, followed by significant outflows when range lows approached $60,000,” said Kooner.
Another reason given for the outflows is the unwinding of the basis arbitrage trade in response to forced deleveraging.
“We’ve had significant outflows as CME futures open interest for BTC has declined by $1.2 billion in the past 10 days. This could mean that as funding rates have gone negative amidst this price decline, ETF inflows that were part of the basis trade have unwound,” said Kooner.
Shorting Perpetual Future Trades
According to a source, traders are also buying the ETFs and shorting the perpetual futures, benefiting from the price appreciation as Bitcoin rose and earning funding from the short position.
“Now funding is going negative for shorts, that trade is being unwound and traders are selling the ETF position and closing their short – hence the drop in BTC open interest on the CME,” said an anonymous source.
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