Massive Outflows Persist for Spot Bitcoin ETFs Following FOMC Meeting

Outflows from spot Bitcoin ETFs listed in the U.S. have continued to be substantial following the Federal Open Market Committee (FOMC) meeting. Since the meeting, there has been a total net outflow of $726 million. On June 17 alone, spot Bitcoin ETFs saw outflows of $146 million, according to Sosovalue data. Notably, Fidelity’s Bitcoin ETF (FBTC) experienced $92 million in outflows, while ARK Invest’s ARK Next Generation Internet ETF (ARKB) saw $50 million in outflows. This trend of outflows has been consistent over the last five out of six days. The outflows could be a response to the FOMC meeting’s impact on investor sentiment and the broader economic signals and monetary policy adjustments. The decision to keep the federal funds rate unchanged aligns with the Fed’s strategy to combat inflation. The outflows may also indicate that institutional investors, who favor BlackRock and Fidelity’s ETF products, are reevaluating their risk exposure. The reasons behind the substantial outflows include monetary policy uncertainty and profit-taking. The FOMC’s decisions and statements have introduced uncertainty into the markets, and investors may be choosing to reduce risk in their portfolios. The outflows in the past six days suggest a shift in investor sentiment and strategy, potentially towards safer assets or cash holdings amidst economic uncertainties. However, sudden market moves and outflows are common in the volatile crypto market and could reverse if market conditions stabilize or improve. As the market continues to process the implications of the FOMC meeting and other economic indicators, the crypto market may experience continued volatility. Jag Kooner, Head of Derivatives at Bitfinex, noted that there have been consecutive outflows for the past three trading days, with over $550 million in outflows last week and $146 million in outflows on the first day of the current trading week. Kooner explained that ETF investors lack conviction and are selling below their cost basis. The outflows may also be attributed to the unwinding of the basis arbitrage trade in response to forced deleveraging. Traders are buying the ETFs and shorting the perpetual futures, benefiting from the price appreciation as Bitcoin rises and earning funding from the short position. However, as funding rates have turned negative, the trade is being unwound, leading to the selling of the ETF position and the closing of the short positions. This has resulted in a drop in Bitcoin open interest on the CME.