Bitcoin ETFs Lost $287.7M and Rate Cuts Could Make It Worse – Think Twice Before Investing

• Bitcoin ETFs lost over $287.7M yesterday, making this the third-biggest loss since their launch in January 2024.
• The upcoming rate cuts could create a sell-the-news' effect, potentially crashing the crypto market and sending Bitcoin to $40K.
• Bitcoin istightly correlated to global macroeconomic factors (like the S&P 500), which could influence its performance during financially volatile periods.

Bitcoin ETFs lost $287.7M yesterday, as institutional investors backed out and $BTC dropped to $56K. Fidelity's $FBTC registered the biggest loss, $162.3M, while BlackRock's $IBIT rests at zero.

This marks the third-biggest $BTC ETF loss since May 1, when they lost over $560M, and March 19 ($326M).

Nvidia's sell-off could have played a role in the generalized fear, uncertainty, and doubt (FUD), alongside worries about the upcoming Fed rate cuts.

Bitfinex even speculated Bitcoin could drop to $40K in the coming weeks, primarily because of a sell-the-news' reaction after the rate cuts.

Institutional and crypto traders might be in for tough times, so let's unpack the news.

What's Happening with Bitcoin ETFs and $BTC?

According to Farside Investors, Bitcoin ETFs aren't looking good. Yesterday's outflow was $287.8M, the third-largest this year. Last week wasn't any better either, as $BTC ETFs lost ~$277M.

Source: Farside Investors

Fidelity's $FBTC had the largest outflow at $162.3M, followed by Grayscale $GBTC ($50.4M), $BITB ($25M), and $ARK ($33.6M). Interestingly, BlackRock's $IBIT remains on zero for the second day in a row, potentially indicating more stability even during FUD.

$BTC's free-fall below $60K might not have caused this, as Matteo Greco (research analyst at Fineqia International) confirms.

Interestingly, the correlation between BTC's price action and the ETF flows appear weak, as positive inflows were recorded on Monday and Tuesday despite the significant price drop from over $64,000 to $58,000.Matteo Greco

The analyst noted that Bitcoin's price might be tied to on-chain and digital asset exchange activities instead of ETF flows. This means traders relying solely on $BTC's price to predict the performance of Bitcoin ETFs might want to change their strategy.

Another potential cause of institutional FUD is Nvidia's $250B market cap crash, which sent panic waves in the community and harmed the market sentiment.

Bitcoin is currently $56K, a 3.90% drop in the last day and a 3.80% downturn in the past week. However, the 24-hour trading volume increased by 31.28%, showing significant trading interest.

Will the Fed Rate Cuts Be the Final Nail in the Bitcoin Coffin?

While Fed rate cuts are typically positive for high-risk assets like crypto, a sell-the-news' reaction from the market could temporarily dampen the crypto summer.

A sell-the-news reaction refers to investors speculating on an upcoming event or news (like the rate cuts), driving an asset's price upward (Bitcoin, for instance), and then cashing out once the news goes live (rate cuts taking place), tanking the asset's price.

Bitfinex research confirms this and speculates that Bitcoin might reach $40K this month. Historically, September is a very volatile and poor-performing month for Bitcoin, and the Fed rate cuts could make it worse.

The irony is thick with this one - despite being technically beneficial for Bitcoin, the rate cuts might lead to a crash. $BTC's increasing correlation with the S&P 500 during large price movements made sure the coin remained closely correlated with the global macroeconomic conditions.

What's the Verdict?

As is always the case with crypto, volatility and uncertainty dominate the industry. While the current situation seems to point to a bearish scenario, a change in the macroeconomic conditions could shift everything sideways.

Following the Fed rate cuts, a sell-the-news' reaction could easily crash Bitcoin's price. But if the bear market's reaction is delayed and the bulls take initiative, it could change everything.

While a crypto rally is unlikely in the coming weeks, the pessimistic outlook might not be as harsh as some make it out to be.

We'll see what happens next.

References

• Bitcoin ETF Flow - All Data (US$m) (Farside Investors)
• Bitfinex Alpha Crypto Analysis (Bitfinex)
• We Looked at Five Years of Data-Here's What Happens When Bitcoin Moves (TastyLive)

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