Fed Hawks Spark $415M Crypto Outflows in 2025

Fed’s Hawkish Rhetoric and CPI Data Drive First Crypto Outflows of 2025

The crypto market experienced a significant shift in early 2025, with the first net outflows of the year totaling $415 million. This reversal in investor sentiment was largely driven by two key factors: the hawkish rhetoric from Federal Reserve Chair Jerome Powell and higher-than-expected US inflation data.

Powell's recent remarks indicated a more aggressive stance on monetary policy, signaling that the Fed would keep interest rates elevated for an extended period to combat inflation. This dashed investor hopes for early rate cuts and rattled crypto markets, as higher interest rates generally weigh on speculative assets.

Bitcoin, known for its sensitivity to interest rate expectations, bore the brunt of the investor retreat, indicating a broader risk-off sentiment in the crypto market. The latest CoinShares report indicates that crypto outflows amounted to $430 million last week, with Bitcoin accounting for a significant portion of these outflows.

The negative flows come after the US Federal Reserve (Fed) indicated that inflation climbed to 3% year-on-year (YoY) in January, effectively beating expectations. Similarly, core inflation reached 3.3%, raising market concerns. As BeInCrypto reported, crypto investors reacted negatively, with the overall market cap falling by 5% and Bitcoin slipping below $95,000 immediately.

Most of last week’s crypto outflows, totaling $464 million, originated from the US. According to CoinShares researcher James Butterfill, US-based investors reacted strongly to domestic economic signals. “We believe these outflows were triggered by the Congressional meeting with Fed Chair Jerome Powell, who signaled a more hawkish monetary policy stance, coupled with US inflation data exceeding expectations…The majority of outflows originated in the US…most other countries remained largely unaffected by the news,” an excerpt in the report read.

The $415 million crypto outflow marks the first net withdrawal from digital asset investment products in 2025, disrupting a streak of positive flows. A week earlier, crypto inflows had reached $1.3 billion, highlighting the rapid sentiment shift in response to macroeconomic conditions. Before this pullback, the crypto market had also seen a series of strong inflows, extending the positive flows since the first week of the year.