Bitcoin Faces $305 Million Outflows Amid Strong U.S. Economic Data

By: Eva Baxter

Crypto investment products experienced a significant outflow last week, totaling $305 million, as negative sentiment pervaded the market. According to CoinShares' latest weekly report, the primary catalyst for these outflows was stronger-than-expected U.S. economic data, which diminished the likelihood of a 50-basis point interest rate cut.

James Butterfill, CoinShares' head of research, explained, "We continue to expect the asset class to become increasingly sensitive to interest rate expectations as the FED gets closer to a pivot."

Bitcoin and U.S. Lead the Outflows

Bitcoin bore the brunt of these outflows, with asset managers such as Grayscale, ProShares, and 21Shares all reporting net losses for the week. The leading cryptocurrency saw $319 million in outflows, while the United States experienced a slightly lesser total outflow of $318 million. In contrast, short Bitcoin investment products noted their most significant inflows since March, attracting $4.4 million for the second consecutive week.

Ethereum was also impacted, experiencing outflows of $5.7 million. Trading volumes for Ethereum ETFs remained stagnant, representing just 15% of the activity observed during the U.S. ETF launch week. Galaxy Digital pointed out that Ethereum ETFs were trading at significantly lower volumes compared to Bitcoin ETFs, leading to a continuing decline in the first 25 days of trading. This disparity has been partially attributed to prime trading desks not yet offering margin on Ethereum ETFs.

Solana and Blockchain Equities Buck the Trend

In a market marked by general negativity, Solana emerged as an exception, attracting $7.6 million in inflows. Blockchain equities also showed positive momentum, with $11 million flowing into products focused on Bitcoin miners. This surge in investment is linked to miners leveraging their BTC mining equipment to supply computational power to artificial intelligence (AI) companies. According to VanEck, if Bitcoin miners allocate 20% of their energy capacity to AI computation by 2027, they could see an increase in average yearly profits to nearly $14 billion.