Crypto funds witness $415 million in weekly outflows amid hawkish Fed rhetoric and CPI data: CoinShares

Global crypto investment products run by asset managers such as BlackRock, Bitwise, Fidelity, Grayscale, ProShares and 21Shares ended a five-week streak of consecutive inflows, witnessing $415 million in net outflows last week, according to CoinShares data.

“We believe these outflows were triggered by the Congressional meeting with Fed Chair Jerome Powell, who signalled a more hawkish monetary policy stance, coupled with U.S. inflation data exceeding expectations,” CoinShares Head of Research James Butterfill said in a Monday report.

That prior five-week run had attracted $6.74 billion amid an “unprescended” 19-week post-U.S. election flows that amassed $29.4 billion — far surpassing the $16 billion recorded in the first 19 weeks after the U.S. spot Bitcoin exchange-traded funds launched in January 2024, Butterfill noted.

Weekly crypto asset flows. Images: CoinShares.

The majority of last week's outflows originated from U.S.-based funds, which lost $464 million, while other countries were largely unaffected. Digital asset investment products in Germany saw notable inflows of $21 million, followed by crypto funds in Switzerland and Canada, which added $12.5 million and $10.2 million, respectively.

Bitcoin highly sensitive to rate-cut expectations

Powell gave testimony before the U.S. Senate last Wednesday, reinforcing the central bank's stance of adopting a "wait-and-see" approach to rate cuts, alluding to a potentially slower pace of cuts in 2025. However, QCP analysts noted last week that, despite this hawkish tone, the U.S. Dollar Index (DXY) has failed to rally.

Bitcoin-based funds are “highly sensitive” to interest rate expectations and bore the brunt of last week’s outflows, Butterfill said, totaling $430 million. However, while bitcoin prices have also declined around 2% over the past seven days, according to The Block’s Bitcoin Price Page, Butterfill noted that there were no corresponding inflows into short-bitcoin products, which also saw net outflows of $9.6 million.

The U.S. spot Bitcoin ETFs accounted for $580.2 million of the overall net outflows last week, according to data compiled by The Block.

Solana investment products registered the largest net inflows of any global crypto-based funds, totaling $8.9 million, closely followed by XRP and Sui products, adding $8.5 million and $6 million, respectively.

Meanwhile, Ethereum-based funds generated net outflows of $7 million last week in a sharp turnaround from recording the largest net inflows of $793 million the week prior.

Both bitcoin and ether remain sensitive to macroeconomic factors, Bitget Research Chief Analyst Ryan Lee told The Block, including interest rate trends and regulatory developments. However, a sustained hold above critical support levels, coupled with positive ETF activity, could catalyze a push above $100,000 for bitcoin by the week’s end while a close above the $2,700 to $3,000 resistance zone would signal renewed bullish momentum for ether, he said.