🌎 Bitcoin ETF Inflows Drop Amid Interest Rate and AI Adoption Concerns

Bitcoin ETF Inflows Plummet Amid Rising Interest Rate Concerns and AI Adoption

In the United States, spot Bitcoin exchange-traded funds (ETFs) experienced a significant decline in net inflows over the past week, totaling $559.84 million, a nearly 68% drop from the previous week’s $1.76 billion.

Causes of Decline

The decline in inflows can be attributed to the Federal Reserve’s decision on interest rate cuts and rising concerns over China’s launch of the AI platform Deepseek. This led to a broader risk-off sentiment among investors, causing outflows of $457.48 million from the 12 spot Bitcoin ETFs during the week of January 27-31.

The rising adoption of the Chinese AI app DeepSeek, seen as a competitor to Sam Altman’s ChatGPT, spooked investors and led to a crash in major stock prices, resulting in nearly $1 billion in liquidations across the crypto market.

Impact of Fed’s Decision

Despite the initial decline, the crypto community saw a significant surge in inflows following the Fed’s dovish stance on January 29. The next day, BTC ETFs attracted $588.22 million, a 500% increase, led by BlackRock’s IBIT, which accounted for $321.5 million.

Top Performing ETFs

BlackRock’s IBIT led the pack, attracting $363.83 million in inflows on January 31, followed by ARK 21Shares’ ARKB and VanEck’s HODL, which recorded inflows of $35.59 million and $5.76 million, respectively.

However, Bitwise’s BITB and Grayscale’s GBTC stood out as the only outliers, with investors withdrawing $56.03 million and $30.59 million, respectively.

2025 Outlook for Bitcoin ETFs

According to Matt Hougan, global head of research for Bitwise Assets Management, the 12-spot Bitcoin funds had pulled in nearly $35.2 billion worth of inflows in 2024. For 2025, he predicts inflows to surpass last year’s numbers, stating that Bitcoin ETFs will “end the year north of $50 billion.”

“While we expect significant month-to-month volatility in flows for BTC ETFs over the coming months, we believe that the underlying trend will remain bullish.”

The Bitcoin ETF market is also expected to expand this year, with a host of new ETFs from notable issuers such as Wells Fargo, Stifel, Raymond James, and UBS potentially being approved by the end of the first quarter of 2025.