Bitcoin and Ethereum ETFs Face $280M Outflows Amid US Economic Crises

by
Leah Alger
from Techreport on (#6QEMG)
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  • Rising US economic troubles (like unemployment rates andthe strengthening of the Japanese yen) appear to have negatively influenced the crypto sector.
  • Last week,Bitcoin and Ethereum ETFs witnessed combined outflows of $280M, and the Crypto Fear and Greed index is now in Fear' territory.
  • Despite economic struggles having a ripple effect on financial markets, ETC Group analysts predict a positive macro tailwind for Bitcoin and crypto assetsafter September.

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Recent economic factors, including theUS' rising employment rates and weakening TradFi markets, have raised concerns about the crypto sector's future trajectory.

Reports by ETC Group highlight how economic issues have negatively impacted US Spot Bitcoin ETFs and Ethereum ETFs (combined net outflows of ~$280M last week).

However, according to the ETC analysts, there's light at the end of the tunnel. Let's explore the situation.

Economic Struggles Trigger Crypto & TradFi Downturn

According to the ETC Group, numerous negative factors have spilled into crypto assets, causing US Spot Bitcoin ETFs and Ethereum ETFs to experience net outflows of $268.3M and $12.6M last week.

One of these factors is the US unemployment rate, which spiked from 4.1% in June to 4.3% in July - its highest level since October 2021.

Moreover, the Japanese yen significantly strengthened compared to the dollar, appreciating by 12% between July 3 and August 3.

Stock prices of US-based Nvidia (the third largest global company by market cap) also declined by 7.90% this week, raising concerns aboutripple effects on financial markets.

Coinciding with these US economic issues, the Crypto Fear & Greed Index shifted from Greed' to Fear' yesterday morning. This shows hesitation from crypto investors as $BTC dropped below $58K.

The Crypto Fear & Greed Index has shifted from Greed" to Fear" this week, dropping from 55 to 26 as #Bitcoin falls below $58K. pic.twitter.com/rpMrlDoE3J

- CoinGecko (@coingecko) September 2, 2024

Crypto Assets May Withstand Economic Troubles

The US' economic struggles suggestreduced investments in riskier assets (like crypto).

BitMEX's former CEO believes investors are endowing safer investments like reverse repurchase agreements (RRPs) because they offer much higher returns, which may affect Bitcoin's price growth.

The fact that September is a historically challenging month for Bitcoin isn't helping matters either. This implies the market will likely not rebound until October.

However, ETC's analysts believe it's unlikely for $BTC to revisit recent lows, and that there'spotential for a positive shift in favor of cryptocurrencies.

We think that the fact that Bitcoin has become less sensitive to changes in global growth expectations, the turnaround in global monetary policy combined with a broad Dollar weakness could provide a very positive macro tailwind for Bitcoin and cryptoassets going forward.ETC Group

Our Verdict - A Cautiously Optimistic Long-Term OutlookThe current US economic landscape poses challenges for the cryptocurrency industry, with the net outflows of Bitcoin and Ethereum ETFs reflecting the risks.

More investors might prefer safer investments, like RRPs. However, Bitcoin staying resilient against unfavorable economic conditions could lead to recovery and a more bullish market sentiment.

While thecrypto industry will likely remain bleak throughout September, our long-term outlook is - cautiously - optimistic.

References

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