In a tumultuous week for the cryptocurrency market, U.S.-listed spot Bitcoin exchange-traded funds (ETFs) faced significant investor withdrawals for the fourth consecutive trading day. Stagflation fears, exacerbated by recent U.S. service sector data, appear to have spooked investors, leading to a cumulative net outflow of $196 million from 11 ETFs on Tuesday. Fidelity’s FBTC and BlackRock’s IBIT bore the brunt, according to figures from data provider SoSoValue. This trend is part of a larger pattern, as detailed in Spot Bitcoin ETFs Bleed Over $800 Million: Second‑Largest Exit Ever.
Economic Woes and Market Reactions
The latest data from the U.S. Institute for Supply Management (ISM) painted a dreary picture, with its Non-Manufacturing PMI highlighting inflation driven by tariffs, employment weaknesses, and trade disruptions. This cocktail of economic pressures signals stagflation—a dreaded scenario for risk assets like tech stocks and cryptocurrencies.
“The stagflationary mix on the ISM is definitely knocking risk here,” noted the founders of the LondonCryptoClub in a newsletter disseminated via X. Following the release, the tech-heavy Nasdaq index slid 0.7%, erasing Monday’s gains, while Bitcoin, the premier cryptocurrency by market value, dipped over 1% to trade near $114,000.
The scenario is further complicated by the U.S. Federal Reserve’s monetary policy. Bets on a Fed rate cut have gained traction since last Friday’s disappointing nonfarm payrolls data, which underscored labor market frailties. Bloomberg reports suggest options tied to the Secured Overnight Financing Rate are hinting at potential cuts in the Fed’s three remaining meetings this year, cumulatively slashing rates by 75 basis points in 2025.
Diverging Fortunes: Bitcoin vs. Ether
While Bitcoin ETFs grappled with outflows, Ether (ETH) ETFs were a different story. They bucked the trend by attracting $73.22 million in inflows, breaking a two-day losing streak. This shift in investor sentiment might be tied to recent SEC guidance that clarified staking activities and token receipts, under certain circumstances, don’t fall under securities offerings. Such clarity likely piqued investor interest and paved the way for potential approval of spot Ether ETFs with staking. For a deeper dive into the regulatory implications, see our coverage of the SEC’s latest guidance.
Nate Geraci, president of NovaDius Wealth Management, remarked, “The SEC’s guidance has cleared the last hurdle, stopping the market regulator from approving spot ether ETFs with staking.” This development appears to have instilled confidence among crypto investors, even as Bitcoin ETFs struggle.
Historical Context and Market Implications
Historically, the crypto market has been sensitive to macroeconomic indicators, and the current environment is no exception. The longest outflow streak since April highlights the fragility of investor confidence amid economic uncertainties. The market’s reaction underlines the persistent challenges facing both traditional and digital financial landscapes.
As the Fed’s potential rate cuts loom on the horizon, the crypto community is left pondering the broader implications. Will a dovish Fed provide the cushion needed for a beleaguered market? Or will the specter of stagflation overshadow any potential benefits from a rate reduction?
Looking ahead, investors and analysts alike will be keeping a close eye on upcoming economic releases and Federal Reserve pronouncements. The market’s trajectory remains uncertain, and while Ether ETFs show promise, Bitcoin ETFs face a challenging path. For now, the crypto world watches and waits, with cautious optimism mingled with trepidation.
Source
This article is based on: Bitcoin ETFs Bleed Millions for 4th Straight Day as U.S. Stagflation Fears Weigh on BTC and Stocks
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
