Hawkish Fed Remarks Coincide with $360M in Crypto Outflows, Yet Solana ETFs Shine

Recent comments from Federal Reserve Chair Jerome Powell have triggered a significant reaction in the cryptocurrency market, resulting in $360 million in outflows from investment products. This occurred despite a recent rate cut. In contrast, new interest in Solana Exchange-Traded Funds (ETFs) has led to a notable uptick in inflows.

Key Takeaways

The cryptocurrency market experienced $360 million in outflows attributed to cautious remarks from the Federal Reserve.
The U.S. markets were primarily responsible, with $439 million in outflows, while Germany and Switzerland saw minor inflows.
Bitcoin ETFs faced the most significant losses, with redemptions reaching $946 million.
Solana attracted $421 million in inflows, fueled by demand for newly launched ETFs.
The newly introduced Solana Staking ETF saw a strong debut, indicating solid institutional interest.

Hawkish Fed remarks drive $360M in crypto outflows but Solana ETFs shine

Crypto Market Reacts to Fed Comments

Last week, the cryptocurrency sector experienced outflows amounting to $360 million as investors processed Federal Reserve Chair Jerome Powell's remarks regarding future interest rate adjustments. Although there was a rate cut announced on Wednesday, Powell's warning that another cut in December wasn't guaranteed, combined with a lack of economic data due to an ongoing government shutdown, has left the market feeling uncertain, according to CoinShares’ report published on Monday.

The majority of the selling pressure originated from the U.S. markets, experiencing $439 million in outflows, despite some inflows from Germany and Switzerland that partially offset the losses. Bitcoin ETFs led this decline with a staggering $946 million in redemptions.

Weekly crypto asset flows. Source: CoinShares

Despite the significant outflows affecting Bitcoin, not all cryptocurrencies faced the same fate. Solana distinguished itself by attracting $421 million in inflows, marking its second-highest amount on record. This surge in interest is largely due to the recently launched U.S. exchange-traded funds (ETFs), which boosted Solana’s year-to-date totals to an impressive $3.3 billion. Notably, Ethereum also saw inflows of $57.6 million, although daily trading activity suggested mixed sentiments among investors.

These outflows come on the heels of a previous week, where cryptocurrency products had amassed $921 million in inflows, influenced by lower-than-anticipated Consumer Price Index (CPI) data released on October 24.

Related: Retail investors 'retreat’ to $98.5K: 5 things to know in Bitcoin this week.

Introduction of New Solana Staking ETF

Last Tuesday marked the debut of Bitwise’s Solana Staking ETF (BSOL), which launched with $222.8 million in seed assets. This strong start reflects significant institutional interest in Solana staking products. The BSOL ETF allows investors to gain direct exposure to Solana, potentially generating an estimated 7% annual yield from on-chain staking rewards.

By Friday, Solana ETFs recorded a fourth consecutive day of inflows, adding $44.48 million. Vincent Liu, the chief investment officer at Kronos Research, commented to Cointelegraph that this trend demonstrates growing interest in staking yields and a continuous “capital rotation,” as traders capitalize on recent rallies in Bitcoin and Ether.

However, it’s important to note that despite the surge in ETF inflows, SOL's trading price was about $166 at the time of this report. This represented a decline of over 9% in the past 24 hours and a drop of approximately 26% over the last 30 days, as per data from CoinGecko.

Solana price chart. Source: CoinGecko

Magazine: Solana vs Ethereum ETFs, Facebook’s influence on Bitwise: Hunter Horsley.