Bitcoin ETFs See $342.2 Million Outflow After Powell's Rate Hints

Bitcoin exchange-traded funds (ETFs) experienced a significant outflow of $342.2 million, marking the end of a 15-day streak of inflows that totaled over $4 billion. This reversal was triggered by Federal Reserve Chair Jerome Powell's indication that the central bank would maintain its restrictive monetary policy due to lingering tariff concerns.

Fidelity’s FBTC fund was the most affected, with $172.7 million in outflows, while Grayscale’s GBTC recorded $119.5 million in redemptions. This shift highlights the sensitivity of institutional investors to the prospect of prolonged higher interest rates, which can dampen the appeal of riskier assets like Bitcoin.

Powell, speaking at a forum, acknowledged that the Fed would have already begun cutting rates this year if not for President Donald Trump's trade policies. He explained that the tariffs had led to a significant increase in inflation forecasts, prompting the central bank to pause its rate-cutting plans. This admission comes amid ongoing criticism from Trump, who has demanded immediate rate cuts and labeled Powell as "stubborn" and "stupid."

Despite the outflows, market analysts caution against overreacting to a single day's flows, describing it as a "rest stop" rather than a sign of waning institutional interest. Shawn Young, chief analyst at a crypto exchange, noted that after nearly $5 billion flowed into spot Bitcoin ETFs, it is natural for some investors to pause and reassess their positions, especially with the Fed hinting at delaying rate cuts.

Tuesday's selling pressure affected multiple funds, with Bitwise’s BITB posting $23 million in outflows and ARK 21Shares’ ARKB recording $27 million. BlackRock’s IBIT, which had dominated the prior inflow streak with $3.8 billion or 81% of total flows, registered flat activity alongside four other major Bitcoin ETFs. Bitcoin itself saw a modest drop of 1.3% to $105,859 in the 24 hours following Powell's remarks, but has since recovered, trading at $107,822.

Young attributed the short-term outflows to broader macro conditions, stating that higher rates for longer naturally curb demand for riskier assets like Bitcoin. However, Ethereum ETFs posted positive inflows on the same day, suggesting that institutional investors are not backing out but are being selective and positioning carefully based on overall market signals. Young emphasized that one day of unusual trading in the ETF market does not negate the billions of dollars that have already flowed into Bitcoin ETFs, indicating that institutional interest remains intact.