$ETH & $BTC ETFs Bleed, Investors Bearish in Anticipation of Fed’s Rate Cut
- At the beginning of September, Bitcoin exchange-traded funds ($BTC ETFs) experienced the largest outflows since March.
- $BTC and Ethereum ($ETH) struggle to rebound to former heights, with a 2.95% and 5.94% weekly decline, respectively.
- US investors give in to FUDin anticipation of the Federal Reserve's (Fed) rate cut on September 18.
Last week, $BTC ETFs recorded $643M outflows, the highest since March. $ETH funds lost another $98M, bringing the total outflows from crypto ETFs to over $725M.
Interestingly, bearish sentiment is only prevalent in the US, as European investor flows were positive.
Despite Friday's dip to $52.6K and major ETF outflows, $BTC rebounded to $57K but still stands below last week's opening of $59K.
What causes FUD among US investors, and do crypto ETFs have hope for recovery? Let's unpack this.
Traditional Investors Flee Crypto?Crypto appears to be losing steam with institutional investors. $BTC ETFs have been recording outflows from August 27 to September 6, translating into anover $1.2B cumulative loss.
$BTC ETFs saw $28.7M net inflows on Monday, but it's still too early to judge whether a recovery is underway.
Out of the 11 $BTC ETFs, four had positive net flows (Fidelity, Ark & 21Shares, Bitwise, and Invesco), yet the two largest funds (BlackRock and Grayscale) maintain a bearish trend. Other funds had no flows yesterday.
$ETH ETFs trailed behind $BTC funds since listing and recorded just one day of positive net flows since August 15.
The total net outflows from $ETH ETFs reached $573M, with a $5.2M outflow recorded on Monday. Although eight out of nine ETFs witness positive performance, outflows from Grayscale Ethereum Trust exceed the cumulative inflows from other funds.
ETF flows typically mirror the underlying asset's performance. $BTC has been declining since August 26, when it briefly hit $64K before falling to $52.6K on Saturday.
Despite a 3.72% 24-hour increase, $BTC still struggles to break above the resistance zone and return to its all-time high of $73K.
$ETH also experienced a bearish reversal last week, with a 6.22% decline. Throughout the month, $ETH was trading above $2,680 for only five days and has steadily declined since August 27.
$ETH now stands at $2,358 with a 1.3% 24-hour increase but remains 42% below its yearly high of $4,066.
Is a US Recession Imminent?The negative sentiment among US investors likely comes from macroeconomic concerns.Last week, the Labor Department showed a weakening hiring trend. The increased likelihood of a 25 or even 50 basis point (bp) rate cut by the Fed adds to the gloom picture.
Yield curve inversion (when the interest rates on short-term bonds are higher than those on long-term bonds) has hintedat an impending recessionsince 2022.
As the inversion persisted without an economic downturn, some investors have started questioning its predictive power.
Yet, current data suggests a delay in the recession's onsetrather than the indicator's unreliability.
The Sahm rule (the average unemployment rate over three months) standing above 0.5 further reinforces recession concerns.
Ultimately, US investors are waiting for the Fed's decision on September 18. Given the macroeconomic uncertainty, many are hesitant to invest in high-risk assets like crypto and are adjusting their portfolios accordingly.
Closing RemarksDespite a brief recovery, $BTC ETFs continue to see significant outflows, indicating that institutional investors remain cautious about the crypto market.
The negative sentiment is particularly pronounced among US investors due to uncertainty surrounding the Fed's monetary policy.
We'll have towait for September 18and see how the rate cut will impact financial markets.
ReferencesClick to expand and view sources- Bitcoin (CoinMarketCap)
- Ethereum (CoinMarketCap)
- US BTC Spot ETFs (SoSoValue)
- US ETH Spot ETFs (SoSoValue)
- Real-time Sahm Rule Recession Indicator (FRED)
- 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity (FRED)
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