Bitcoin ETF Inflows Plummet Amid Rising Interest Rate Expectations

Bitcoin’s brief price surge has come to an end, with the cryptocurrency experiencing a 5% drop on January 7. This decline was largely driven by rising expectations of a more hawkish approach from the Federal Reserve.

Bitcoin’s Price Volatility

Bitcoin’s price had previously surged past $102,000, sparking renewed optimism among investors. However, this gain was short-lived, with the cryptocurrency dropping by 5.7% within 24 hours. The decline was largely attributed to rising U.S. bond yields and investor caution ahead of key economic updates.

The increase in bond yields has fueled expectations of a more hawkish stance from the Federal Reserve. Officials have already signaled plans for only two interest rate cuts in 2025, fewer than previously anticipated. Investors are now awaiting the Fed’s meeting minutes, set to be released on Wednesday, January 8, for more clarity on policymakers’ deliberations.

Pressure from Job Market Reports

Further pressure on Bitcoin came from a U.S. Labor Department report revealing job vacancies had climbed to a six-month high, driven by growing demand in the services sector. This precedes the crucial nonfarm payroll report scheduled for Friday. A stronger-than-expected jobs report could solidify expectations of prolonged Fed tightening, as a resilient labor market may continue to fuel inflationary pressures.

Bitcoin ETF Inflows Decline

The falling Bitcoin price resulted in inflows of just $52.9 million across the 12 Bitcoin ETFs on January 7, as expectations of a hawkish stance from the Federal Reserve dampened risk-on sentiment among investors. Notably, this figure represents a 94% drop compared to the $987 million inflows recorded the previous day.

According to data, BlackRock’s IBIT was the only BTC ETF to record an inflow on Tuesday, drawing in $596.11 million of inflows. Meanwhile, ARK and 21Shares’s ARKB logged the highest outflows of the day with $212.55 million exiting the fund.

Key Outflows

Some of the notable outflows include:

  • Grayscale’s GBTC: $125.45 million
  • Grayscale’s BTC: $113.85 million
  • Fidelity’s FBTC: $86.29 million

Bitcoin’s Current Price

At press time, Bitcoin was exchanging hands at $96,145 per coin, having dropped 5.61%.

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