Spot Bitcoin ETFs Shed $1.3 Billion in Two Weeks Amid Market Downturn

Key Takeaways:

• Bitcoin ETFs have experienced outflows totaling $1.3 billion in the last two weeks.
• Grayscale led in outflows, with $517.3 million withdrawn in the period.
• Fed's decision to maintain interest rates might have triggered massive Bitcoin sell-offs.

Explaining Spot Bitcoin ETFs Outflow and Reasons Behind the Negative Run

Outflows from United States spot Bitcoin exchange-traded funds (ETFs) have reached a staggering $1.3 billion over the past two weeks, reflecting the ongoing decline in Bitcoin's price.

According to data from Farside Investors, the total outflow for spot Bitcoin ETFs during this period amounted to $1.298 billion. Grayscale's asset management fund, GBTC, led outflows, with $517.3 million withdrawn.

In stark contrast, BlackRock’s Bitcoin ETF (IBIT) was the only fund to post positive results, attracting $43.1 million in inflows over the same two weeks. 

The recent wave of outflows across spot Bitcoin ETFs represents the worst since April, when net outflows exceeded $1.2 billion between April 24 and May. 

Related: VanEck Bitcoin ETF Debuts on Major Australian Stock Market

CoinShares Head of Research James Butterfill attributed the recent outflows to investors' pessimism regarding potential interest rate cuts by the Federal Reserve this year. 

According to Butterfill, investors may have anticipated rate cuts, which would have boosted Bitcoin's appeal. 

However, when the Fed maintained interest rates at 5.25%-5.50% on June 13, this decision likely shattered these expectations, triggering a sell-off of Bitcoin holdings in response to the Fed's decision.

The #FOMC holds its benchmark rate range unchanged at 5.25-5.50% as expected.

The SEP shows the group's own rate forecasts for end of year 2024 have increased to 5.1% from 4.6% in March pic.twitter.com/TEjLKp7O5b

— John Kicklighter (@JohnKicklighter) June 12, 2024

The market's turmoil was further aggravated following news that bankrupt exchange Mt. Gox would start repaying creditors in July. With more than $9.4 billion worth of Bitcoin owed to approximately 127,000 creditors, there are fears of a massive BTC sell-off once repayment begins.

That’s like over half of all the ETF inflows being negated in one shot. Damn. https://t.co/rBrFb6xpX1

— Eric Balchunas (@EricBalchunas) June 24, 2024

Bloomberg's Senior ETF Analyst, Eric Balchunas, highlighted the potential impact of this decision. He argued that such a move could cancel out more than half of all ETF inflows, further depressing Bitcoin prices.

How Does this Affect the Bitcoin Market?

The outflow of $1.3 billion from spot Bitcoin ETFs has not gone unnoticed. 

Recent data shows that the crypto fear and greed index dropped to 30, the fear zone, the lowest in 18 months. 

NEWS: The Crypto Fear & Greed Index is now in the "Fear" zone as #Bitcoin fell 4.6% in the past 24 hours.

Are you buying, selling, or HODL-ing? pic.twitter.com/Lwo6cH99Yd

— CoinGecko (@coingecko) June 25, 2024

The Crypto Fear and Greed Index measures the market sentiment of the broader crypto sector. 

When the market is bullish, the index rises to the “Greed” zone (a score between 50 and 74). In contrast, when bearish sentiments prevail, it drops to the “Fear” zone (a score between 24 and 50). 

Renowned Bitcoin analyst Willy Woo predicts that the Bitcoin market could see a correction up to four weeks before resuming its price rally. Woo's analysis suggests that the market may need time to absorb the current selling pressure and stabilize before any potential recovery. 

Eyeballing this model… probably 1-4 weeks more of cooling down before #Bitcoin price action is sufficiently boring.

Chart: Intensity of speculators playing casino games. https://t.co/GC0NlFgT6W pic.twitter.com/B3bmD6C5vG

— Willy Woo (@woonomic) June 22, 2024

This potential correction aligns with the projections made by popular crypto analyst Rekt Capital on June 17, who anticipated further downside pressure based on the previous week's closing price.

Conversely, crypto trader Jelle believes this might be a temporary downtrend rather than a projected deeper correction. She shared her insight in an X post, noting that Bitcoin’s daily RSI (Relative Strength Index) has not been this low in nearly a year. 

#Bitcoin's daily RSI has not been this low in nearly a year.

In fact, the last time we saw oversold conditions was when BTC traded at $26,000.

Summer shakeout? pic.twitter.com/1cssBzGcHh

— Jelle (@CryptoJelleNL) June 24, 2024

The RSI is a technical indicator used to measure whether an asset is oversold or overbought based on recent price changes. Jelle's observations suggest that the current market conditions might present a buying opportunity rather than a prolonged downturn.