On Wednesday, both US spot bitcoin and ether ETFs saw significant outflows, indicating that the recent recovery rally has lost its appeal among institutional investors.
According to data from SoSoValue, bitcoin funds faced a loss of $82 million, while ether funds saw outflows of $29 million. Notably, BlackRock's IBIT experienced a $31 million decline, and ARKB was down by $44 million, with all ether funds closing in the negative.
The shift was prompted by the Federal Reserve. During Kevin Warsh's inaugural meeting as chair, interest rates were maintained at 3.50% to 3.75%, as anticipated, but the outlook became more aggressive.
The median prediction now suggests that the policy rate could reach 3.8% by the end of 2026, an increase from 3.4% in March. Furthermore, nine out of 18 officials indicated a potential rate hike this year. Currently, the market estimates a nearly 60% chance of a rate increase as early as October. The anticipated rate cuts that had fueled the recent surge are no longer on the table.
As a result, the price movements have stagnated. The total market capitalization of cryptocurrencies has remained stable around $2.26 trillion since the close on Tuesday, with bitcoin's price dropping to approximately $63,800, which is the mid-point of its recent rally, according to CoinDesk data.
The macroeconomic environment has shifted dramatically. The peace agreement that initially alleviated inflation concerns has been overshadowed by a Fed that is now leaning towards rate hikes, replacing the expectations for cuts that the crypto market had relied on.
Looking ahead, the focus will be on the likelihood of an October rate hike and whether interest in ETFs will return.