U.S. spot Bitcoin exchange-traded funds (ETFs) experienced a staggering $580.6 million in net outflows last week, shattering a five-week streak of inflows. Grayscale’s recently converted GBTC ETF led the exodus with a colossal $274.3 million fleeing the higher-fee fund. Ark Invest’s ARKB and Fidelity’s FBTC followed suit with significant outflows of $149.7 million and $146.3 million, respectively.

Amidst the chaos, BlackRock’s IBIT emerged as the sole sanctuary, attracting a modest yet notable $41.6 million in net inflows. Meanwhile, the remaining U.S. spot Bitcoin ETFs stood still, witnessing net outflows of zero for the week. Despite the tumult, total net inflows into these ETFs since their January inception remain a formidable $15.1 billion.
This mass exodus brought an abrupt end to a record-breaking 19-day streak of positivity, during which the ETFs amassed over $4 billion in net inflows. The downturn began with a jarring $64.9 million in net outflows last Monday, triggered by conflicting U.S. economic data on non-farm payrolls and unemployment, sowing seeds of uncertainty and pushing investors away from riskier assets, as noted by QCP Capital.
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The sell-off intensified on Tuesday, with another $200.4 million in net outflows looming ahead of the Federal Open Market Committee (FOMC) meeting. A brief respite came on Wednesday, bringing in $100.8 million in net inflows. However, the Federal Reserve's decision to hold interest rates at 5.5%, coupled with hints of only one rate cut in 2024 amid persistent inflationary pressures, spurred further outflows of $226.2 million on Thursday and a staggering $189.9 million on Friday.
The more hawkish-than-expected FOMC meeting reverberated globally, causing digital asset investment products to hemorrhage $600 million last week — the largest outflow since March 22, according to CoinShares' latest report. Bitcoin bore the brunt, with $621 million in outflows, while bearish sentiment also spurred $1.8 million in inflows into short-bitcoin positions, as highlighted by CoinShares Head of Research James Butterfill.
Butterfill attributed this massive outflow to the unexpectedly hawkish FOMC meeting, which prompted investors to scale back their exposure to fixed-supply assets. The resultant net outflows, coupled with a 5% drop in Bitcoin's price amid a broader crypto market sell-off, slashed global assets under management from $100 billion to $94 billion.

Trading volumes for global digital asset investment products also plummeted last week to $11 billion, starkly lower than the yearly weekly average of $22 billion, according to CoinShares. U.S. spot Bitcoin ETFs generated $8.73 billion in trading volume for the week, a far cry from the peak of $32.69 billion witnessed in early March. Cumulative trading volumes for these ETFs now approach a monumental $300 billion, as per The Block's data dashboard.
In a twist defying the trend, ether-based investment products recorded $13 million in net inflows globally last week. Analysts speculate that once live, Ethereum spot ETFs could capture 10-20% of the flows currently directed towards Bitcoin ETFs, drawing parallels to historical trends observed in gold and silver ETFs.

The U.S. Securities and Exchange Commission (SEC) approved 19b-4 forms for eight spot Ethereum ETFs from heavyweights like BlackRock and Fidelity on May 23. However, the crucial S-1 registration statements must be declared effective before trading can commence, a process potentially extending over weeks.
SEC Chair Gary Gensler projected that S-1 approvals for spot Ethereum ETFs could materialize by the end of summer. On a hopeful note, Bloomberg ETF analysts Eric Balchunas and James Seyffart speculated that these launches could occur as early as July 2, bolstered by reports of SEC staff issuing light comments on S-1s with a swift turnaround expected.
As the crypto market braces for the next wave of turbulence, the unfolding drama in the ETF landscape continues to captivate and confound investors worldwide.
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