U.S. Spot Bitcoin ETFs See Slower Inflows Amid Fed Chair Powell’s Hawkish Comments

In the past week, U.S. spot Bitcoin ETFs experienced a significant slowdown in inflows as investors adopted a cautious approach following Federal Reserve Chair Jerome Powell’s recent remarks on interest rate policies. The shift in sentiment underscores the influence of macroeconomic factors on cryptocurrency investment trends.

Bitcoin ETF Inflows Drop by Over 35%

According to recent data, Bitcoin ETFs garnered $603.74 million in inflows from May 12-16, marking a drop of more than 35% compared to the $934 million recorded the previous week. This decline reflects the growing uncertainty among investors regarding the Federal Reserve’s future monetary policy decisions.

Among the top-performing funds, BlackRock’s IBIT led the pack by attracting a substantial $841.7 million in inflows. In contrast, other ETFs like Grayscale’s BTC and VanEck’s HODL saw more modest contributions of $39.8 million and $7.3 million, respectively.

Outflows and Stagnant Activity in Other Bitcoin ETFs

While some funds gained traction, others faced net outflows. Fidelity’s FBTC recorded the largest outflow at $122.2 million, followed by Grayscale’s GBTC and ARK 21Shares’ ARKB, both losing approximately $70 million each. Even smaller funds like Bitwise’s BITB and Invesco’s BTCO witnessed minor redemptions. Several ETFs reported no activity over the week, reflecting investor hesitation in the current market environment.

May Still Records Strong Inflows Despite Weekly Decline

Despite last week’s slowdown, overall inflows into Bitcoin ETFs remain robust for May. So far, $2.64 billion has been invested in these funds this month, close to April’s $2.97 billion. Since their debut in January 2024, Bitcoin ETFs have collectively attracted over $41 billion in net inflows, signaling sustained interest in this asset class.

Ethereum ETFs Outperform Bitcoin ETFs

In contrast to Bitcoin ETFs, Ethereum ETFs had a stronger performance last week. Nine Ethereum-focused funds recorded $41.59 million in net inflows, rebounding sharply from the $38.15 million in outflows seen the previous week. This highlights the growing interest in Ethereum as an investment option, even amidst broader market uncertainty.

Macroeconomic Factors Weigh on Crypto Sentiment

The recent pullback in crypto markets can be attributed to Powell’s comments following the April Producer Price Index (PPI) report. While the PPI showed a 0.5% decline, suggesting easing inflation, Powell emphasized the need for “sustained evidence” before the Federal Reserve considers rate cuts. This cautious stance has pushed analysts to delay their expectations for rate cuts, with many now predicting a potential shift in September or later.

Powell also pointed out that higher real interest rates, global risks like supply chain disruptions, and tariffs are contributing to heightened economic uncertainty. These factors have created headwinds for riskier assets, including cryptocurrencies.

Crypto Market Faces Correction

The total cryptocurrency market capitalization fell by 3.3% over the past 24 hours, now sitting at $3.35 trillion. Bitcoin dipped 0.7% to approximately $103,000, while Ethereum faced a steeper decline, dropping 4.8% to below $2,400, a critical support level.

Earlier optimism in the crypto market, fueled by a temporary trade agreement between the U.S. and China to roll back tariffs for 90 days, was short-lived. Treasury Secretary Scott Bessent warned that the U.S. could quickly reinstate tariffs if negotiations faltered, further dampening market sentiment.

Expert Insights on Market Trends

“The upward momentum in equity markets has moderated following the conclusion of tariff negotiations, as short-term traders began locking in profits, triggering corrective movements. This shift in sentiment has spilled over into riskier assets, including Bitcoin. As a result, the current pullback appears to be a correction within a broader medium-term uptrend. However, ongoing global economic uncertainty and persistently high interest rates in the U.S. may act as headwinds, potentially capping the upside potential of this trend.”

– Ruslan Lienkha, Chief of Markets at YouHodler

Upcoming Economic Data to Watch

Investors are now closely monitoring the May 30 release of the Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred measure of inflation. The upcoming data is expected to play a pivotal role in shaping future monetary policy decisions and could significantly impact the cryptocurrency market.

Stay informed on the latest cryptocurrency news and trends to make well-informed investment decisions in this evolving market.

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