Spot Bitcoin exchange-traded funds experienced a sharp drop in inflows on Jan. 7 as Bitcoin fell 5%, driven by rising expectations of a more hawkish approach from the Federal Reserve.
Bitcoin, the world’s largest cryptocurrency, surged past $102,000 yesterday, sparking renewed optimism among investors anticipating a market rally ahead of President-elect Donald Trump’s upcoming inauguration.
However, the gains were short-lived as Bitcoin dropped by 5.7% within 24 hours, weighed down by rising U.S. bond yields and investor caution ahead of key economic updates, including the Federal Reserve’s meeting minutes and nonfarm payroll data.
The increase in bond yields has fueled expectations of a more hawkish stance from the Federal Reserve. Officials have already signaled plans for only two interest rate cuts in 2025, fewer than previously anticipated. Investors are now awaiting the Fed’s meeting minutes, set to be released on Wednesday, Jan. 8, for more clarity on policymakers’ deliberations.
Further pressure on Bitcoin came from a U.S. Labor Department report revealing job vacancies had climbed to a six-month high, driven by growing demand in the services sector.
It precedes the crucial nonfarm payroll report scheduled for Friday. A stronger-than-expected jobs report could solidify expectations of prolonged Fed tightening, as a resilient labor market may continue to fuel inflationary pressures.
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Bitcoin ETF inflows plunge by 94%
The falling Bitcoin price resulted in inflows of just $52.9 million across the 12 Bitcoin ETFs on Jan. 7, as expectations of a hawkish stance from the Federal Reserve dampened risk-on sentiment among investors. Notably, this figure represents a 94% drop compared to the $987 million inflows recorded the previous day.
According to data from SoSoValue, BlackRock’s IBIT was the only BTC ETF to record an inflow on Tuesday. The asset manager’s spot Bitcoin ETF drew in $596.11 million of inflows managing to offset the collective outflows seen from the other BTC ETFs.
ARK and 21Shares’s ARKB logged the highest outflows of the day with $212.55 million exiting the fund. Grayscale’s two Bitcoin ETFs tickered GBTC and BTC also contributed to the negative momentum with $125.45 million and $113.85 million outflows respectively.
Fidelity’s FBTC reported an outflow of $86.29 million while Franklin Templeton’s EZBC saw a more modest outflow of $5.58 million. The remaining BTC ETF saw “0” flows on the day.
Meanwhile, the daily trading volume for these investment products stood at $4.62 billion on Jan. 7 a jump from the $3.96 billion witnessed a day before.
AT press time Bitcoin (BTC) was exchanging hands at $96,145 per coin.
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