Bitcoin and Ethereum ETFs experienced significant withdrawals on Wednesday, October 29, totaling over 550 million dollars in a single day. Funds from Fidelity, BlackRock, and ARK Invest were among those affected, reflecting a sharp change in investor sentiment. The question remains whether this represents a simple correction or the beginning of a more substantial market downturn.
In Brief
- •Spot Bitcoin ETFs recorded net outflows of 470 million dollars on October 29.
- •Fidelity’s FBTC fund saw the largest withdrawals, with 164 million dollars redeemed.
- •Ethereum ETFs experienced losses of 81.4 million dollars, primarily from Fidelity’s FETH.
Investors Sever Ties with Bitcoin and Ether ETFs
Exchange-traded funds linked to crypto assets faced a significant setback. On October 29, Bitcoin and Ether ETFs experienced massive withdrawals, indicating renewed caution among institutional investors.
Fidelity led these outflows with 164 million dollars withdrawn from its FBTC fund. ARK 21Shares followed with 143 million dollars, and BlackRock saw 88 million dollars depart its fund. In the Ethereum segment, Fidelity’s FETH fund lost 69.5 million dollars within a few hours.
This coordinated movement underscores growing nervousness within an unstable macroeconomic environment. The anticipated Federal Reserve rate cut, generally favorable to risk assets, did not produce the expected positive effect. Bitcoin's price even declined by 2.4% following statements from Jerome Powell, who acknowledged internal disagreements regarding the possibility of another cut in December.
Ryan Lee, chief analyst at Bitget, commented on the market's sharp reaction:
We consider the strong wave of cryptocurrency sales following Fed Chairman Jerome Powell’s dovish tone as a classic case of disappointed expectations in a market hypersensitive to liquidity signals.
Large investors opted to secure gains and rebalance their portfolios. Amidst increased Bitcoin volatility, rising bond yields, and geopolitical tensions, the prevailing climate has shifted towards caution.
Divergent views within the Federal Reserve suggest that anticipating future monetary policy decisions will be more challenging. This increasing uncertainty is translating into a loss of investor confidence and directly impacting the appetite for crypto ETFs.
The scale of this movement is noteworthy. October had commenced with an optimistic outlook, characterized by consistent capital inflows. However, the end of the month abruptly reversed this trend.
Analysts attribute this shift not only to macroeconomic factors but also to typical institutional behavior. Unlike retail investors, who tend to maintain stable positions, large portfolios adjust their holdings rapidly in response to conflicting signals.
Navigating Immediate Turbulence and Long-Term Conviction
The divergence between Bitcoin and Ethereum perfectly illustrates the sector's ongoing challenges. Bitcoin is increasingly establishing itself as a recognized strategic reserve asset by institutions, while Ethereum continues to face headwinds due to persistent regulatory uncertainty.
The 81.4 million dollars withdrawn from Ether ETFs highlights the tentative nature of institutional adoption in this segment, contrasting with the perceived solidity of the Bitcoin market.
Despite recent volatility, the long-term fundamentals remain robust. Matt Mena, an analyst at 21Shares, points out that November has historically been a favorable month for Bitcoin, with positive performance in eight of the last twelve years, averaging a gain of +46%.
The 50 billion dollars in assets under management within Bitcoin ETFs, despite recent volatility, signifies a deep-seated conviction among professional investors.
Major banks are anticipating at least two more rate cuts in 2025, a scenario that could potentially revitalize digital assets and reignite inflows into crypto products.
The current situation raises the question of whether this is a temporary tactical retreat or the beginning of a more profound correction. While 56% of market participants still expect a rate cut in December, internal divisions within the Federal Reserve and ongoing US-China trade tensions contribute to an uncertain climate. For crypto ETFs, November is poised to be a critical test of resilience amidst macroeconomic nervousness.