Weekly Crypto Products Experience $454 Million in Outflows Amid Fed Concerns

As worries regarding the U.S. Federal Reserve’s interest rate policies rise, investors withdrew a significant $454 million from cryptocurrency exchange-traded products (ETPs) last week. This withdrawal counteracted much of the earlier gains that had added approximately $1.5 billion to the sector during the first two trading days.

Key Takeaways

Major Withdrawals: A total of $454 million was pulled from crypto products last week due to uncertainty around Fed rate cuts.
Bitcoin and Ethereum Affected: Over $405 million was withdrawn from Bitcoin-linked products, with Ethereum experiencing $116 million in outflows.
Selective Inflows: Despite overall outflows, some assets like XRP and Solana saw positive cash inflows.
Global Trends: While U.S. crypto products faced significant exits, European markets attracted investments, suggesting a shift in where investors feel more secure.

Crypto

Bitcoin and Ethereum See Significant Withdrawals

Products linked to Bitcoin faced the most significant withdrawals, totaling around $405 million, while Ethereum funds lost approximately $116 million. Multi-asset crypto products also saw net redemptions nearing $21 million. These trends appear tied to recent inflation and employment data, which have led investors to lower the chances of a potential interest rate cut by the Fed in March. Consequently, this has diminished the appetite for risk assets that had previously benefited from a wave of optimism.

Crypto Analytics

Some Altcoins Attract Investor Interest

Interestingly, not all tokens were abandoned during this pullback. XRP saw an influx of around $46 million, while Solana ETPs attracted about $33 million. Smaller tokens, including various newer layer-one projects, have also reported some modest cash inflows as investors look for opportunities beyond the major cryptocurrencies.

Despite these weekly withdrawals, the total assets under management (AUM) across global crypto ETPs remain robust, near $182 billion, indicating substantial market depth even amidst the shift.

Regional data reveals that U.S.-linked crypto investment products experienced an exit of approximately $569 million last week. However, some markets in Europe and North America recorded inflows, with Germany drawing about $59 million, Canada adding $25 million, and Switzerland increasing by roughly $21 million. This trend indicates that capital has shifted away from U.S. products and moved toward markets where investor demand continues to be more favorable.

BTCUSD trading at $90,627 on the 24-hour chart: TradingView

Market analysts suggest this reversal in inflows and outflows is a result of traders adjusting their expectations regarding monetary policy easing. With inflation metrics trending higher than anticipated and the labor market staying resilient, market dynamics have shifted, leading to a repricing of risk assets. Some experts caution that ongoing volatility may be a feature of the market, though demand for specific alternative coins could facilitate some short-term price recoveries.

Overall, these outflows underscore how sensitive cryptocurrency fund flows can be to broader economic signals. Although a withdrawal of $454 million is significant for a single week, the market's AUM of approximately $182 billion means that one week’s activity alone does not drastically alter the overall market outlook. Investors appear poised to closely monitor future economic indicators and Fed communications, as any changes in rate-cut expectations could result in a quick reaction from fund flows.

Featured image from Gemini, chart from TradingView