Institutional Investors Flee Crypto ETFs Amid Powell's Policy Uncertainty

Bitcoin and Ethereum exchange-traded funds (ETFs) experienced significant outflows in the days leading up to Federal Reserve Chair Jerome Powell’s highly anticipated speech, signaling heightened risk aversion among institutional investors. Spot Bitcoin ETFs recorded $363.1 million in net outflows on September 23, the largest selloff of the month, with Fidelity’s FBTC accounting for $276.7 million of the decline. Spot Ether ETFs followed suit, losing $76 million, led by Fidelity’s FETH with $33.1 million in redemptions. The outflows pushed combined assets under management (AUM) for Bitcoin and Ethereum ETFs below $150 billion, marking a reversal from earlier inflows and reflecting growing uncertainty ahead of Powell’s remarksBitcoin, Ether ETF Data Signals Selloff Sentiment Ahead of^[1].

The selloff intensified as macroeconomic concerns and mixed Federal Reserve messaging weighed on investor sentiment. Over two trading sessions, Bitcoin ETFs shed $645 million, with Fidelity’s FBTC, Grayscale’s GBTC, and Bitwise’s BITB among the hardest-hit funds. Analysts attributed the outflows to a combination of profit-taking and macroeconomic de-risking, driven by weak job growth, mixed inflation data, and Powell’s cautious stance on rate cuts. “Investors are scaling back risk ahead of the Jackson Hole meeting and Powell’s speech,” said Illia Otychenko of CEX.IO, noting that the selling pressure mirrored a broader shift toward caution in global marketsBitcoin ETFs Shed $645M This Week as Wall Street Retreats …^[4].

The Federal Reserve’s recent policy trajectory has added to the uncertainty. While the central bank cut rates by 25 basis points in its latest meeting, Powell emphasized that future easing would remain “data-dependent,” tempering expectations for rapid rate reductions. This ambiguity has left markets in limbo, with the U.S. Dollar Index (DXY) holding steady near 97.40 and Treasury yields near 4.15%. JPMorgan CEO Jamie Dimon further fueled caution by warning that rate cuts would only occur if inflation continues to decline, a statement that exacerbated investor anxietyBitcoin, Ether ETF Data Signals Selloff Sentiment Ahead of^[1].

The impact of the ETF outflows extended to broader crypto markets. Bitcoin’s price dipped to $113,000 from a recent peak of $118,000, erasing $200 billion in market value over the past week. Ethereum also faced pressure, trading near critical support levels as leveraged long positions were liquidated. “The correction is necessary to absorb profit-taking and reduce short-term leverage,” observed Linh Tran of XS.com, who described the pullback as a potential precursor to a more stable price baseSudden $200 Billion Crypto Sell-Off Sparks Fresh Bitcoin Price^[2]. Meanwhile, derivatives data showed declining open interest in Bitcoin and Ethereum futures, indicating a lack of aggressive bearish bets despite the selloffETF Outflows Signal Risk Aversion Before FOMC, Powell Speech: …^[3].

Market participants are now focused on Powell’s speech, scheduled for later this week, as the central bank’s policy direction could dictate the next phase of crypto and equity market movements. QCP Capital highlighted that a “hawkish tone” from Powell or unexpected inflation data could trigger further volatility, while a signal for accelerated rate cuts might reverse the downward trend. “If Powell delivers exactly what’s anticipated, crypto could see sideways-to-slightly-bearish action,” said Nansen’s Nicolai Sondergaard, underscoring the delicate balance between priced-in expectations and potential surprisesETF Outflows Signal Risk Aversion Before FOMC, Powell Speech: …^[3].

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